Дайджест европейских СМИ: Первый квартал 2009 года для Лондонского рынка недвижимости оказался худшим за последние 20 лет, однако эксперты замечают знаки скорого восстановления рынка.

Более половины арендаторов уже пересмотрели свои возможности аренды площадей, говорится в исследовании Cushman & Wakefield, опубликованном в Property Week на этой неделе. По данным опроса 750 арендаторов офисных площадей, 40% компаний стали использовать площади более интенсивно – средняя площадь, приходящаяся на одного сотрудника в Европе, сократилась с 12,9 кв.м. до 12,4 кв.м.

Euro tenants squeeze occupational costs
Occupiers are increasingly looking to their property to save money in the downturn
More than half of the tenants in Cushman & Wakefield’s European Landlord and Tenant Survey have already changed their space use, and considered options such as desk sharing to cut occupational costs.
The survey covered 750 occupiers and landlords and found that only 9% of landlords and 26% of tenants did not see property as a way of cutting costs in the hard times ahead.
Tenants may renegotiate leases or sublet surplus space, but the upfront costs of moving to cheaper space made this an unlikely option.
Forty per cent of tenants said they were using space more intensively, and expected this to further increase next year.
The average floorspace per worker in Europe has fallen from 12.9 sq m to 12.4 sq m, led by financial services companies, half of which have reduced their space per person in the last year.
Eric Peeters, head of European business space at Cushman & Wakefield, said: ‘It is indeed a challenging time for both landlords and occupiers.
‘However, the lack of grade A space in many major cities and the current curb on construction activity should ensure that the office markets are well placed to respond to an upturn in the global economic situation when it comes.’

Первый квартал 2009 года для Лондонского рынка недвижимости оказался худшим за последние 20 лет, однако эксперты замечают знаки скорого восстановления рынка – пишет Дейдре Хипвелл (Deirdre Hipwell) из Property Week.
Despair Mile
By Deirdre Hipwell
As the City of London concludes its worst quarter’s performance for 20 years, experts are finding signs that the market may soon pick up
As the sixth quarter of the ‘downturn’ nears an end, any veneer of optimism that it may be shortlived seems wildly hopeful, particularly after such a grim start to the year.
During the first three months of this year the UK was confirmed as being in recession, the retail sector faced continued stress, large swathes of the UK banking sector were part-nationalised and high-profile property casualties began to mount as Castlemore and Mountgrange Capital went into administration.
But nowhere has the decline in the property market been felt more deeply and quickly that the City of London.
And, after months of rapid deterioration, the first quarter of 2009 has the inauspicious honour of being the City market’s worst performance for more than 20 years.
Peter Bennett, surveyor for the City of London Corporation, says: ‘If you are somebody looking to invest in the City, particularly in terms of development, it’s disastrous at the moment. The [development] market is totally dead and won’t be viable for quite some time.’
This sobering opinion is likely to be confirmed in next week’s official first-quarter figures.
The biggest area for concern in the City is the occupational market. Atisreal says first-quarter take-up could be as low as 220,000 sq ft, which is a ‘fifth of what is considered to be a healthy number for each quarter’.
It comes after a 2008 fourth-quarter take-up of 645,000 sq ft, which itself was the lowest for five years. Atisreal says the previous all-time lowest take-up record was in the third quarter of the last downturn in 1991. But even that was slightly better at 500,000 sq ft.
These abysmal figures are echoed by Jones Lang LaSalle, which is provisionally reporting around 308,000 sq ft take-up, compared with a 2008 first-quarter take-up of more than 1.3m sq ft – a near-75% decline (graph 1). It says prime rents in the City have declined more than 10% from a high of £58.50/sq ft in the fourth quarter of 2008 to about £48.50/sq ft (graph 2).
CB Richard Ellis will report estimated take-up of 246,833 sq ft with a breakdown that shows that a mere 44,000 sq ft of office space was let in January. It will also report a decline in prime City rents from £53.50/sq ft in February this year to £46.50/sq ft in March – a decline of 13% in a matter of weeks.
25% off
Anecdotal evidence already suggests that lettings are being signed at below £45/sq ft, while rent incentives are increasing. Insurance company Robert Fleming two weeks ago agreed to take 42,000 sq ft at Aviva Investors and Atlas Capital’s 20 Gracechurch Street at £42.50/sq ft (news, 13.03.09).
It is a significant letting for the market but will complete at a 25% rent reduction from a £55/sq ft high at the scheme.
Tim Roberts, head of offices at British Land, which has a significant City portfolio, is spearheading efforts to lease its 600,000 sq ft Ropemaker scheme, Broadgate Tower and the final 10% of 201 Bishopsgate.
Evoking another grim period in British history, he says: ‘It is a very, very poor start to the year and I am tempted to use that phrase from World War II: it will all be over by Christmas.’
He refers, of course, to the downturn and not the City market.
‘I am not really saying it will be over by Christmas,’ says Roberts. ‘But it is probably not going to be as long and as dreadful as everybody thinks.
‘The major problem is confidence among occupiers and most would rather defer a decision until tomorrow in the hope there is more visibility to what the world economy is going to do. It is not just a City issue, it is a central London problem.’
Indeed, Canary Wharf, too, is showing signs of distress (see below).
There is no doubt that confidence is key. Some important occupational deals have already fallen through in the City. Fortis Bank and LaSalle Investment Management pulled out of taking space at St Martin Property’s 150 Cheapside and Hermes Real Estate’s 20 Gresham Street respectively. There could be further downward pressure on rents as landlords seek to attract cautious occupiers.
And hopes that the City’s first-quarter take-up total could be ‘saved’ by the completion of Bank of Tokyo Mitsubishi’s take-up of 200,000 sq ft at British Land’s Ropemaker scheme look likely to be dashed by the quarter’s end next week.
Although the letting is still firmly on track, it is likely to complete within the next four weeks, making the second quarter look more hopeful.
Meanwhile, there is continued speculation about whether law firm Orrick Herrington & Sutcliffe will complete its letting of 75,000 sq ft at 107 Cheapside, which has been the subject of High Court wrangling between developer Carlyle and Irish group Menolly.
Pipeline problems
The pipeline of completed space is also increasing further, weighting the market in favour of tenants. CBRE reports that there is 4m sq ft still under construction in the City and a total of 6m sq ft proposed for development between 2009 and 2011.
CBRE says there is a total current supply of around 9.2m sq ft with a 9.4% vacancy rate.
Drivers Jonas’s initial figures show a first-quarter vacancy rate of 8.7% and an availability of 7.3m sq ft (graph 3). Atisreal paints a more depressing picture, reporting a total availability of 10m sq ft and a void rate of 12.4%.
However, this development pipeline is vastly more conservative than in the previous downturn when the City was swamped with space and vacancy levels increased rapidly.
In addition, not all planned development will go ahead, particularly if banks’ appetite for development finance does not return.
Already, large-scale skyscraper schemes such as Land Securities’ ‘Walkie Talkie Tower’ at 20 Fenchurch Street, and British Land’s ‘Cheesegrater’ at 22 Leadenhall Street are on hold. Nor has there been significant release of tenant-controlled ‘grey’ space onto the market – the hallmark of the last downturn.
Francis Salway, chief executive of Land Securities, which is developing One New Change near St Paul’s Cathedral, says: ‘The City office market represents only a small part of our overall business – about 8 %.
‘We are strong believers in the long-term strengths of the City as a global financial centre, but occupier demand is clearly at a cyclical low point right now. However, City vacancy levels are not expected to reach the same levels as in the early 1990s. The City now has a far lower level of development completions – at around the level of the early 1990s.’
Landlords are also reporting a vast increase in viewings and it is known that occupiers such as pharmaceutical conglomerate Astra Zeneca, which is based in the West End, Canadian bank Toronto Dominion, law firm Clyde & Co and financial brokerage firm MF Global are looking for space.
Khalid Affara, managing director of Arab Investments, which is developing the Pinnacle skyscraper on Bishopsgate and marketing its 60 Gresham Street scheme ahead of its completion next month, says: ‘Everyone is just seeing doom and gloom but I have been surprised by the amount of viewings we have had.
‘There is a lot of pent-up demand but people are afraid to jump too early. We are not going to get the full rents and we have dropped the quoting rent but we will be OK.’
William Hill, head of property at Shroders, says: ‘I expect that, as far as a percentage falls go, the City will compare favourably with the West End, where rents are falling. However, the City has to reinvent itself to appeal to a broader spectrum of occupiers.’
British Land’s Roberts believes the slump in lettings is not terminal. ‘This quarter will be worse than the 1990s but the vacancy level is not anywhere near as high. In the medium term it will be about supply and demand. Occupiers deferring for a few months may affect rents at a marginal level but of more interest is where rents will be in the medium term.’
Some argue that, far from looking into the abyss, the City occupational market has reached equilibrium and is perfectly poised to capitalise on opportunities that will present themselves in the coming months.
Those with the nerve to ride the storm could also be well placed, particularly as a weaker sterling attracts foreign tenants.
Peter Ferrari, joint managing director at Heron International, which is speculatively developing the Heron Tower at 110 Bishopsgate, says: ‘The vacancy rate is relatively low compared with the last recession and the space will be absorbed. Generally what happens is occupiers all move at the same time and they all want the same thing but supply is inelastic.
‘There is every probability that, by the time we have completed Heron Tower, the vacancy rate will be very much lower than today and we will be the only building completed in 2011. It all depends how sentiment changes and I think it will start to improve.’
Undersupply on the horizon
There is, indeed, growing opinion that the City will suffer from a shortage of space over the coming years. The City’s head of planning, Peter Rees, is convinced of it.
He says there is undersupply because of modest construction and ‘a lot of demolition as people are knocking buildings down to remove their empty rates liability’.
He expects this potential shortage of supply could attract tenants, particularly from the West End, looking for good-quality space at cheaper rents, and says: ‘London is still one of the most popular destinations on earth and, if you come to the City, you expect quality of use, otherwise you would go to a provincial centre where there is plenty of crap that has been built.’
Investment: yields peak in sight
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The City has not shined in investment terms but has outperformed the occupational market in the first quarter. Following a fast decline in values, the investment market may have bottomed out with yields between 7.25% and 8% for prime property.
It is a return to sensible pricing, which experts say is evidenced by the return of veteran investors such as Raymond Mould and Patrick Vaughan buying Legal & General’s 1 Fleet Place and Vincent Tchenguiz’s Consensus Business Group, which is expected to complete the £200m purchase of Standard Chartered’s building on Basinghall Street this week (PropertyWeek.com, 21.03.09).
King Sturge reports a first-quarter investment total of around £348m so far -on a par with previous low-performing first quarters in 2000 and 2002 when investment totalled £297m and £322m respectively.
Jones Lang LaSalle reports a larger first-quarter total of £520.3m, albeit still reflecting a huge decline from the £1.2bn 2008 first-quarter total and £2.1bn of the first quarter of 2007 (graph 4).
Among the completed sales are Hermes’ Garrard House to Swedish investment group AFIAA, Prupim’s City Place House to AEW Europe at a 10% yield and Land Securities’ Fleet Street Estate to the City of London for £75m. New Star Asset Management has also exchanged contracts with German pension fund BVK for the sale of Governor’s House at £70.3m – a 7.25% yield (news, 20.03.09).
Historically low interest rates, a vastly depreciated sterling and the comparative attractiveness of property compared with other investment sectors, could help the City investment market.
German and sovereign wealth funds, and overseas investors are looking but much will depend on the properties offered for sale. Fund managers trying to counter redemptions were among last year’s biggest sellers, but they are likely to sell fewer assets this year.
James Beckham, head of City investment at King Sturge, says: ‘Only one of the four largest deals this quarter was completed with debt finance, which partly explains the low volumes.
‘Where there is long-term income, such as LaSalle Investment Management’s Friary Court, which has 15-year income, it will likely sell at below 7% yield.
‘Indeed, yields may have found a floor in the first quarter where there is longer income and the risk profile is reduced, thereby creating greater interest.’
Docklands: bloodied by the banks
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Canary Wharf is a tougher market to call because there are more concerns about its future than current performance. Despite its heavy reliance on the beleaguered financial sector availability remains relatively low.
Knight Frank reports a total of 685,000 sq ft openly on the market, excluding space under offer, that is capable of being occupied within six months from now, equating to an availability rate across the district of only 5%.
Space available includes the nearly completed 5 Churchill Place, which was to be occupied by Bear Stearns and is being marketed for sublease by JP Morgan, which took over the failed bank.
However, by this time next year Knight Frank predicts that additional space under construction will push supply up to around 1.2m sq ft, which will increase the vacancy level to around 8%.
And more space could become available as some of the Wharf’s big banking occupiers, including Nomura, Barclays Capital, Bank of America and Credit Suisse, review their occupational strategies.
Meanwhile, Lehman Brothers administrator PricewaterhouseCoopers will be working out leasing strategies for Lehman Brothers’ 825,000 sq ft at 25 Bank Street.