Earlier this month, Chief Executive of Land Securities Francis Salway announced that the firm intends to go ahead with its Walkie Talkie office building development in London's financial district - despite the current economic climate and no letting deal with a major tenant. What has given the firm the confidence to proceed with the project at this time and is Mr Salway's optimism well placed?
In an interview with the Financial Times, he stressed the need to focus on the future. "Large companies need to plan two to three years ahead and look through the current economic climate to what their long-term needs are. They realise supply is going to get short and are talking to us early," Mr Salway said. The joint venture with Canary Wharf Group will provide 680,000 sq ft of office space, along with a 14,000 sq ft retail area and the project is due for completion in 2014.
Jones Lang LaSalle recently indicated that companies that can embark on speculative developments are likely to reap the rewards further down the line. Head of Office Agency at the organisation Neil Prime commented: "The supply gap in 2013-2016 is being exacerbated by the current economic environment. This will provide opportunity for those who can speculatively develop or refurbish existing stock, as when the occupational market returns, choice will be limited and competition will increase driving rental returns."
A report released by BNP Paribas Real Estate also highlighted the lack of new supply coming on to European office markets, noting that low levels of construction are likely to continue in the sector for the foreseeable future. In its third quarter study into the main office markets in western Europe, the firm revealed that vacancy rates in London dropped by 160 basis points between the third quarter of 2010 and the corresponding period in 2011 and now stand at 6.4 per cent. Director of Jones Lang LaSalle's global research team Jeremy Kelly pointed out earlier this month that worldwide vacancy rates for offices are at their lowest level in two years. He added that prime markets are "well placed" to recover once confidence returns to occupiers and businesses as a whole.
- Thursday 24 November 2011