Frost Meadowcroft

Market Commentary - rate of increase in availabilty of office supply slows

September 03

The supply and demand of office space in Central London saw little change from the first quarter of 2003:

* Total availability now stands at 32.7 million sq ft, up 1.7% from last quarter
* The City and East End was small increases in availability (4.7% and 3.5% respectively), while there as virtually no change in availability in the West End or Midtown.
* Second-hand space still dominates the supply of space, accounting for 50% of the total
* 2.2 million sq ft of space is currently under offer.

London Availability

At the end of Q2 of 2003, the total central London office availability stands at 32.70 million sq ft, the highest for nearly 10 years. In January 1994, total availability was 32.14 million sq ft. It then sustained nearly continuous reductions each quarter until October 2000, when it reached 7.74 million sq ft. However, the trend reversal and rate of increase has been more dramatic, taking only just over 2 years to see availability break the 30 million sq ft mark.

The rate of increase in total availability appears to be slowing. In Q2, availability rose by just over 500,000 sq ft, equating to an increase of 1.7%. Putting this into perspective, the average percentage rise per quarter for the last 12 months has been 4.3%, which, in itself, is much lower than the 15.1% average quarterly growth seen in the last 2.5 years. Despite this apparent slow-down in the growth of available space, the message from the market is that it would premature to forecast a reversal.

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