Lack of office space ‘starting to impact market’

Low availability of good quality office space could impact on the market this year, leading commercial property agency Jones Lang Lasalle has warned.

Data published yesterday by Jones Lang Lasalle, shows a healthy take-up of industrial and commercial property space in the first quarter of the year — 1.23 million sq ft, in 50 deals.

However, the bulk of the deals were made up of secondary office space, which accounted for 60% of the take-up. Only 8% of take-up related to prime office space.

“Availability of good quality space remains the biggest issue for the sector, and with very limited prime supply, we could start to see this impact the amount of take-up over the course of the year,” according to Nigel Healy, a director at Jones Lang Lasalle.

“Although demand remains focused on prime quality space, the limited choice for occupiers of good-quality stock is impacting the type of take-up quality, with the majority of actual deals signing for secondary and tertiary space,” added the company’s head of research, Hannah Dwyer.

“Although the first quarter was strong, we are not expecting this pace to continue over the next three quarters. With tightening supply, and relatively static capital values, it is of no surprise that sales continue to dominate over lettings.

“This is a theme that has continued for the last 12 months or so, and we see no reason as to why there should be a change in this behaviour for the rest of 2015. This being the case, capital values will rise noticeably, as have rents,” Mr Healy said.

A continued lack of bank funding for development projects is also hampering commercial property sector growth and while lending has resumed, there remains a gap for construction and development finance, says Jones Lang Lasalle.