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News Release

London

Limited Grade A supply will drive recovery in UK Office markets outside London

Downward pressure on rents to stabilise according to Jones Lang LaSalle’s latest research report


London, 17th February 2010 – As the UK economy sees a tentative return to growth, some recovery is anticipated in the UK regional office leasing market for locations outside of London, although this will be as a result of steadily decreasing supply as opposed to any increase in demand according to Jones Lang LaSalle’s new report, Office Market Conditions Across the UK released today.
 
As the development pipeline declines, Jones Lang LaSalle forecasts that Grade A space will start to tighten over 2010 in most locations outside of London. Finance for speculative developments will be extremely limited between now and the end of 2011 resulting in selective shortages by 2012, further widening the gap between prime and secondary market conditions.
 
Limited Grade A supply will however ease the downward pressure on rents, which Jones Lang LaSalle anticipates will stabilise in most UK locations by the end of 2010. Markets such as Edinburgh and Leeds, which started to fall later, are slightly further behind in the cycle, while Birmingham, which fell first and most aggressively, is past the worst.
 
Cameron Stott, Director, Agency & Development in Jones Lang LaSalle’s Edinburgh office, said: “Whilst it is difficult to generalise incentives, which vary significantly between deals subject to covenants, lease lengths and the landlord’s financial position, further outward movement in rent free periods were seen in the Scottish markets during Quarter 4 2009.”
 
Cameron Stott added: “In the Edinburgh rental market there was a further softening during the final quarter as prime rents fell 1.8% to £28.00 per sq ft. Prime rents in Glasgow fell 1.9% over the same period to £26.00 per sq ft, although this is now stabilising.”
 
In the English markets, incentives have already stabilised. Jones Lang LaSalle forecasts that rents will harden this year and we will see growth from 2011.  Landlords of secondary stock are expected to stay under increasing pressure to cut rents and increase incentives in order to secure tenants for empty space and cover void costs.