Office rents in the U.K.’s main financial district — The City of London, also known as the Square Mile and home to more banks, insurers and other financial-services co.’s than anywhere in Europe — are falling to 1991 levels.
From Bloomberg: About 9 million square feet…are available in the City and that may climb to 12 million by the end of 2009, according to CB Richard Ellis Group Inc., the biggest commercial property broker. Almost 19 percent of all City offices may be vacant next year…
“We’re in the eye of the storm,” said Bryan Higgins, CIO of Irish homebuilder Menolly Group, which bought 107 Cheapside in the City three years ago for 150 million pounds ($227 million). The building has no tenants. “Supply way exceeds demand,” he said.
According to British analysts vacancy rates in London are likely to continue rising. That will further depress prices on rental market and subsequently deteriorate capital values. Analysts at London-based King Sturge International LLP estimate rents will drop to 40 pounds per square foot by the end of this fiscal year.