Imperious London leads the way

Published 03rd Mar 2010

London's commercial real estate market has led a rebound from the credit crisis and global recession, according to CB Richard Ellis Group Inc.

The city's prime office rents fell before those in New York, Hong Kong or Tokyo and then were the first to bounce back in the second half of 2009 as financial markets improved, the Los Angeles-based property broker said in a report published today. Demand in the U.K. capital has come mainly from overseas investors drawn by a weaker pound.

"Office demand in central London is expected to sustain the recently improving trend in 2010," Peter Damesick, head of U.K. research at CB Richard Ellis, said in the report. "A severe supply squeeze in new office space is now clearly in prospect for 2011 through 2012, creating the foundation for the next upswing in the rental cycle."

Office values and rents started falling worldwide in 2007 and declines accelerated the following year as companies fired thousands of workers. Banks have reported losses and writedowns totaling $1.25 trillion, largely related to real-estate loans.

London is the world's largest market for international insurance, bond trading and derivatives traded over the counter. Net effective rents -- including rent-free periods -- have fallen 50 percent in the city's main financial district since 2007. Rents excluding incentives rose in the last three months of 2009 following seven quarters of declines.

"London and Hong Kong have shown much stronger improvement in investment volumes and values" since the first quarter of 2009, the broker said.

Source: ' TMC '

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