Take-up of new offices in the City of London has fallen to its lowest for more than 20 years as the slowdown in the economy has reined in financial services businesses from expanding and moving to new buildings.
There has been just 220,000 sq ft of new occupied space in the Square Mile since the beginning of the year, half the previous lowest office take-up during the last recession, when 500,000 sq ft was let in the third quarter of 1991.
The economic downturn has hit the City office market hard, with many businesses looking to cut staff and reduce office occupation. Some are also looking to sub-let their own space.
According to data compiled by Atisreal property consultancy since 1987, the vacancy rate in the City is 12.4 per cent, or 10m sq ft, still significantly less than the last recession, when a fifth of offices were empty.
Even so, there are a number of new buildings set for completion in the next two years that will add to those figures.
City rents have also fallen sharply. Dan Bayley, head of national sales and lettings at Atisreal, said that prime rents were now about £45 per sq ft, down about a third from the peak of the market in 2007 when offices were being let at about £67.50 per sq ft.
Mr Bayley said that there were a number of deals that could happen before the end of the quarter. In the largest, British Land is in talks to let about 200,000 sq ft at its Ropemaker Place building to Bank of Tokyo Mitsubishi.
Bank of America is also looking at options to move Canary Wharf staff to the City headquarters of Merrill Lynch.
Mr Bayley said: “With rents continuing to fall, landlords are experiencing further pain. However,the positive factor is that a number of occupiers really are seeing value for money and, like the West End, may start seeing more activity in the coming q
