London office market turns around as power shifts back to landlords

The offices market in London and the Thames Valley is showing signs of strength, according to three upbeat reports from property agent King Sturge. The firm has found that the amount of offices available has fallen in the City, West End and Thames Valley.

In the City the office vacancy rate has reduced to 8.7%. There is now 6m sq ft on the market compared to 9.7m sq ft a year ago.

However, letting activity in the City office market was down 15% in the first quarter of 2006, compared to the final quarter of 2005. But King Sturge said: "While this level of take-up is disappointing, it is symptomatic of a market with a constricting level of suitable stock and possibly the shift in negotiating power back to the landlords." This would mark a break from the "tenant power" the market had seen during the past four years, it added.

King Sturge also found that more planning permissions were being granted in the City. In the first quarter of 2006 1.9m sq ft of proposals had gained consent.

In the West End the office vacancy rate has fallen from 4.7% to 4.4% in a single quarter. Take up was 40% lower, however, during the past quarter compared to the previous quarter - at 768,900 sq ft.

But King Sturge said the past quarter looked more favourable when compared to the same quarter in 2005, in which take up was a significant 58% lower. King Sturge said that results from the last quarter of any year should be taken in light of the traditional rush to complete deals by year-end.

In the Thames Valley availability of offices was found to be continuing its downward trend, reaching a rate of 10.4% in the first quarter of 2006. Again, take-up was down on the previous quarter - by 30% in this case - but compared to 12 months previously it was up by 23%. King Sturge put the figures down to "little construction activity feeding into the supply chain, coupled with consistent levels of take-up".

The three reports are King Sturge Research Bulletins, 2006 Quarter 1, for City offices, West End Offices and Thames Valley offices respectively.

For more data from the reports, visit: www.qsnews.co.uk