Changes in City occupier demand – DTZ
The subdued outlook for traditional finance-sector employment in the City of London is raising important questions for landlords, investors and developers, says DTZ. Financial sector headcount is forecast to be broadly flat over the forecast period to 2017, with slow or no growth in employment the ‘new normal’ for this sector, the firm notes. Take-up of City office space by the financial sector fell last year to the lowest on record. This has been partly offset by rising demand from the TMT and insurance sectors, the legal sector and other professional sectors, and this trend will continue, to lead in the longer term to a more balanced pattern of demand and a broader tenant base in the Square Mile. However, DTZ does not expect this to be sufficient to restore take-up to previous highs. The firm forecasts average take-up of 4.4m sq ft during 2013-2017, in line with the level experienced since 2008. Despite the subdued take-up level, DTZ expects prime rents for City offices to remain stable in the near term, and to rise to £65 per sq ft by 2017, in a reflection of the limited supply available, both new and secondhand. Importantly, the firm expects prime rents for Midtown offices to overtake for City office space thanks to the very limited supply pipeline, lower availability and strong demand from TMT occupiers in this area of London.