The M25 occupational market is defying the credit crunch, with Hammersmith leading the charge, Knight Frank said this morning.

At it’s M25 Office research breakfast, the property consultancy said demand is strong in the area, which is keeping rents rising.

Continued rental growth

‘We have seen and are forecasting continued rental growth and take-up, which remain strong combined with substantial pre-lets,’ said Emma Goodford, Knight Frank’s head of national offices.

Hammersmith was the best performing area with rents rising by 10% from £38.50/sq ft in the first quarter of 2007 to £42.50/sq ft for the same period in 2008. Knight Frank predicts further growth of 12% by the end of the year bringing rents to £47.50/sq ft.

The worst performing area was Watford which saw rental growth from £21.50/sq ft to £22/sq ft between the first quarter of 2007 and the first quarter of 2008.

Non financial tenants

Goodford says the M25 corridor has not suffered from the impact of the credit crunch in the same way as the City of London because its tenants are not predominantly from the finance sectors.

‘The M25 region, particularly the Thames Valley, experienced its version of the credit crunch in 2001 when the internet bubble burst, and has since shown improving signs of recovery and diverse sector activity,’ she said. ‘Occupationally, the banking and finance sectors have little occupational impact on the M25 leasing market.’

Lack of funds

Knight Frank said the biggest threat to the M25 market was the impact of the credit crunch on speculative development.

‘In the last 12 months we have seen a strong speculative development market, however, this may now be hampered by the lack of access to funds and project viability rather than lack of demand,’ said Goodford. ‘Bracknell and Maidenhead will be most challenged in the next six months due to the potential oversupply of standing and pipeline stock.’

The annual research breakfast, held at the Dorchester hotel on London’s Park Lane, was Knight Frank’s 16th for the M25 Office market.

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