Skip Ribbon Commands
Skip to main content

News Release

London

Jones Lang LaSalle research reveals areas of promise for UK office occupiers


London, 17th June 2009 - According to new research from commercial property firm Jones Lang LaSalle, certain areas of the UK, in response to the recession, are currently providing office occupiers with increasingly competitive rental costs with some of the best incentives available for 10 years.  The research from Jones Lang LaSalle, examines 100 UK markets and reveals that in terms of real cost savings some of the biggest opportunities for occupiers can be secured in major regional  centres such as Birmingham, Manchester and Liverpool.

Falling occupier confidence and accompanying headcount reductions have and will continue to impact upon the UK’s real estate markets.  Revenues are under pressure and occupiers remain in survival mode, intent on achieving significant cost savings.  Consequently, occupational demand has fallen across the key UK regional cities, most dramatically in certain parts of London where take-up in Q1 was 66% below the quarterly average.  The reduction in demand has left landlords fighting for tenants to avoid paying business rates on empty buildings.  Given the reduced leasing activity it is difficult to accurately predict property cost changes.  The continued contraction in the economy, however, combined with increasing supply is reducing expectations of achievable rents.

From its survey of 100 UK markets Jones Lang LaSalle has seen achievable rents react significantly to the economic pressures.  Since March 2008, incentives have increased in all but a handful of markets.  In many towns and cities incentives doubled, or in some cases more than tripled what they were offering last year. In Brighton for example, incentives increased from six to twelve months.

In many markets occupiers are now being offered extremely attractive terms with overall net effective rents as much as one quarter less than the headline achievable rents being quoted.  In over half (53) of the markets Jones Lang LaSalle monitors, rent free periods are now as much as two years or longer.

In particular, certain parts of London and surrounding areas have witnessed substantial falls.  East Anglia too has experienced downward pressure on costs, with Norwich and Chelmsford falling by more than 15% (y-o-y) as of March 2009.  Incentives in these markets have also moved out further making overall rents nearly 20% cheaper than March last year.
 
The Midlands and South West of England have shown slightly more resilience in headline rents with more limited pressure to date.  Using aggressive strategies to attract tenants, however, landlords are now offering significant incentives.  In the Midlands, the average rent free period is now estimated to be no less than 18 months.
 
Jones Lang LaSalle’s research confirms that the North West England has seen some of the greatest pressure on incentives.  In Bolton, for example, rent free periods in March 2008 stood at between 12-18 months.  This increased to 30 months as of March 2009; making overall net effective rents 27% cheaper than a year ago.  For the North West as a whole, rent free periods now stand at between 30-36 months on average.   However incentives are beginning to harden in central Manchester in recognition of the shortage of Grade A buildings and the limited new stock that will be delivered over the next three years.

Overall, tenants can look forward to far more favourable terms than previously on offer.  However, the challenge for landlords will be in finding these tenants.  Commenting on the research John Izett, Head of Jones Lang LaSalle’s National Office Agency team, said: “The window of opportunity for occupiers to take advantage of the current favourable conditions remains in place at least for the foreseeable future.  Corporate occupiers who are actively testing market conditions and publicising potential requirements can maximise their leverage with existing landlords on lease breaks and expiries and take advantage of the favourable market conditions.  In addition, landlords are getting more creative, removing impediments to tenant relocations using lease buyouts, increased concessions and capital contributions.”