Take-up in the M25 office sector is faring better following the credit crunch than it did after the dot com bubble burst, according to Knight Frank.
Take-up in the region fell 20.4% in the third quarter of 2008 from the previous quarter and 35% from the same period last year. But the firm said that, when compared with the third quarter in 2002, take-up was 13% higher.
When compared with 2002’s third quarter figures, take-up was 45% higher along the M4 corridor and 70% higher along the M3.
Knight Frank said ‘named unsatisfied demand’ in the M25 market reduced by about 20% on the third quarter of 2007 because of shelved requirements as a result of the wider financial turmoil. The firm said south east occupier demand accounted for 5.72m sq ft in the third quarter this year, down from the area’s yearly average of between 6m and 7m sq ft.
Emma Goodford, head of national offices at Knight Frank, said: ‘The level of requirements was dented in quarter three, 2008, but it needs to be placed into context with the last downturn. Back in 2001, at the peak of the last cycle, unsatisfied demand was about 15m sq ft and this fell, virtually overnight, to 4.5m sq ft.’
‘In terms of supply, the M25 vacancy rate moved up marginally from its six year low of 6.8% in Q2 2008 to 7% in Q3 2008, having been on a broadly downward trend since Q4 2003, when the vacancy rate peaked at 9.8%.’
‘Several quarters have now passed since the credit crunch, and it is important to point out that circumstances across the south east market are far more balanced, in terms of supply and demand, than was the case in the equivalent period six years ago.’
'The fallout from the credit crunch is likely to impact on rental levels but not in any way like that which occurred six years ago.’
She said: ‘Looking forward over the next 12 to 18 months, we would naturally expect the economic circumstances to put downward pressure on rents, but this will be driven more by sentiment, rather than massive oversupply as it was last time.’