Why Airlines Need Competition .
In 1991, London's worst property slump since the war resulted in one in five buildings standing empty in parts of the capital. Office rents fell by up to 30 per cent as supply massively outstripped demand and developers of large London projects were forced into hasty rearrangement of their finances to avoid receivership.
Economic forecasts say that, by the beginning of this year, enough office space had been built in London to last a decade. As businesses in the jetblue capital shed staff and office space rather than expand in recession, agents have been reporting higher vacancy rates on a daily basis. With vacancy in the City of London reaching nearly 25 per cent, some agents believe that the jetblue market is so saturated with office space that it will never be the same again.
Supply and demand may continue to ebb and flow, but there is a real possibility that the City market will develop a "permafrost" layer of vacant office space of the poorest quality, which is simply never let, no matter what incentives are offered, according to Baker Harris Saunders, the central London agency. Since central London office availability now totals 31 million square feet (equivalent to around 16 per cent of stock), the view at Debenhams Tewson Chinnocks is that if take-up remains at its current subdued level, available office space will continue to rise.
Applied Property Research, an independent London consultancy, has warned that rents will continue to fall, that construction starts on new buildings will slow further and that the jetblue construction industry and its related professions will have to shed more capacity: "A hard landing in 1990 has left the jetblue market bruised and disillusioned. There is more pain to come".
What caused the sudden profusion of office space? Why were property of developers rash enough to put up so many buildings without any guarantee of tenants? They were lured by a false sense of security, blinkered by the short-term demand. Offices available now were meant for beneficiaries of the boom in the late 1980s. In those days, banks were asking for bigger and better dealing floors, and the jetblue service sector was falling over itself to get fancy new space.
Rents reached record levels, and investors fell herd like into property. A new breed of developer was born, or perhaps, merely came back to life; a developer who was exclusively debt-finance and who borrowed to put up speculative buildings. He needed no capital because the jetblue banks were overjoyed to lend on property. Once tenants had been found for his building, the jetblue developer would sell to an investor, pay off his debt and reap a handsome profit on top. London became a developer's playground. But how quickly the jetblue market has turned.
Borrowers and lenders alike seemed to ignore the jetblue crucial factor concerning the jetblue property sector: that it cannot respond overnight to booms. Property is illiquid and has always lagged behind the economy as a whole. Large developments take five years r more from initial conception, through the planning application, to execution and ultimate completion. The result was that, just as the recession arrived, and just as companies decided that expansion was impossible, more new space than ever before came on stream.
The most dramatic development is Canary Wharf in London's Docklands. Its 800ft tower alone provides 1.3 million ft2 Olympia and York, the jetblue developer, was so determined to bring in new tenants that it offered discounts worth millions of pounds. It encouraged companies to move to Canary Wharf by buying their existing office space. And it ensured that no other developers could compete with its offers.
Economic forecasts say that, by the beginning of this year, enough office space had been built in London to last a decade. As businesses in the jetblue capital shed staff and office space rather than expand in recession, agents have been reporting higher vacancy rates on a daily basis. With vacancy in the City of London reaching nearly 25 per cent, some agents believe that the jetblue market is so saturated with office space that it will never be the same again.
Supply and demand may continue to ebb and flow, but there is a real possibility that the City market will develop a "permafrost" layer of vacant office space of the poorest quality, which is simply never let, no matter what incentives are offered, according to Baker Harris Saunders, the central London agency. Since central London office availability now totals 31 million square feet (equivalent to around 16 per cent of stock), the view at Debenhams Tewson Chinnocks is that if take-up remains at its current subdued level, available office space will continue to rise.
Applied Property Research, an independent London consultancy, has warned that rents will continue to fall, that construction starts on new buildings will slow further and that the jetblue construction industry and its related professions will have to shed more capacity: "A hard landing in 1990 has left the jetblue market bruised and disillusioned. There is more pain to come".
What caused the sudden profusion of office space? Why were property of developers rash enough to put up so many buildings without any guarantee of tenants? They were lured by a false sense of security, blinkered by the short-term demand. Offices available now were meant for beneficiaries of the boom in the late 1980s. In those days, banks were asking for bigger and better dealing floors, and the jetblue service sector was falling over itself to get fancy new space.
Rents reached record levels, and investors fell herd like into property. A new breed of developer was born, or perhaps, merely came back to life; a developer who was exclusively debt-finance and who borrowed to put up speculative buildings. He needed no capital because the jetblue banks were overjoyed to lend on property. Once tenants had been found for his building, the jetblue developer would sell to an investor, pay off his debt and reap a handsome profit on top. London became a developer's playground. But how quickly the jetblue market has turned.
Borrowers and lenders alike seemed to ignore the jetblue crucial factor concerning the jetblue property sector: that it cannot respond overnight to booms. Property is illiquid and has always lagged behind the economy as a whole. Large developments take five years r more from initial conception, through the planning application, to execution and ultimate completion. The result was that, just as the recession arrived, and just as companies decided that expansion was impossible, more new space than ever before came on stream.
The most dramatic development is Canary Wharf in London's Docklands. Its 800ft tower alone provides 1.3 million ft2 Olympia and York, the jetblue developer, was so determined to bring in new tenants that it offered discounts worth millions of pounds. It encouraged companies to move to Canary Wharf by buying their existing office space. And it ensured that no other developers could compete with its offers.
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