Lease expiration and clause breakage may lead to difficulty for office space in Central London this year. Companies are expected to relocate and downsize whilst rents are expected to have a strong value.
Many companies will have the option of downsizing the amount of office space in Central London that they lease in 2012 as many of their leases expire.
According to predictions by Jones Lang LaSalle (JLL), there is 6.2m sq. ft of office space in Central London that is set to expire or experience a break clause this year as companies seek more cost effective ways of meeting their property needs.
The commercial property consultants have said that the importance of these lease issues ‘cannot be overstated’ whilst stating that among businesses there is more propensity to extend and restructure leases.
As reported in The Telegraph, some of the companies expected to re-locate from their current office space in Central London are LinkedIn, Prudential Regulatory Authority and Saatchi & Saatchi. However they only account for 775,000 sq ft of space.
In their research Jones Lang LaSalle also stated that they expect the office space take-up across the country to considerably drop below the ten year average, with 3.7m sq ft of leasing expected in the City, 1.4m sq ft below the average.
On the other hand JLL added that rental values are expected to remain strong, even with reduced demand levels. There has been a shortage of new, grade A office space in Central London as many developments were scrapped during the financial crisis, meaning that there was not enough space to meet demands last year.
Due to this, they expect that UK offices will grow in 2012. In the West End a growth of 3.5% is expected whereas an expansion of 3% is expected in the City with JLL, based on historic take-up rates, warning that these locations could run out of office space in eight and 11 months respectively this year.