8 November 2016 | Marino Donati
The EU referendum dampened activity in the office-occupier market in Central London during the first half of the year, according to a report from CBRE.
Its Global Gateway Cities research features analysis of economic, occupier, supply, rent, yield and investment trends in 20 cities across the world.
It says that the result of the EU referendum could constrain demand in the near future, and was generally considered to be negative. However, market fundamentals continued to be strong, and traditional office markets in the West End, City of London and Docklands would remain relatively strong. There will be some continued migration eastwards however, the report said.
The CBRE report predicts that occupiers from sectors such as financial services, the creative industries and business services would be the primary source of demand for office space.
It said that the vacancy rate in Central London offices was 3.2 per cent at the end of the second quarter of the year. This is significantly lower than its average over the long-term, but up 60 basis points on the preceding quarter.
The Central London vacancy rate is also the lowest of all the cities in the report except Tokyo, which had a vacancy rate of 1.9 per cent at the end of the second quarter. In Paris it was 6.6 per cent, and in New York it was 7.4 per cent and 7.7 per cent in Sydney.
There is 14.1 million square feet of office space under construction in Central London, with 47 per cent of anticipated supply pre-let or under offer. CBRE said the supply pipeline for offices was "uncertain" looking ahead, following the Brexit vote.
The report is intended as a guide for investors looking to acquire real estate assets. It analyses trends in Beijing, Boston, Chicago, Frankfurt, Hong Kong, London, Los Angeles, Madrid, Milan, Munich, New York, Paris, San Francisco, Shanghai, Singapore, Sydney, Tokyo, Toronto, Vancouver and Washington, D.C.
The cities were selected on the basis of size, transport infrastructure, corporate presence, real estate investment flows and other indicators.
Chris Ludeman, global president, CBRE Capital Markets, said: "Global gateway cities offer many benefits to real estate investors. Their attractiveness to people and businesses means that space demand in commercial real estate markets increases steadily over the long-term, underpinning rental growth."