TMT Sector Provides Boost for London City Lettings

By Mark Shapland

LONDON--The property market in the City, London's financial center, received a boost in second-quarter activity following high levels of demand from the Technology, Media and Telecoms sector, according to upmarket estate agent Knight Frank.

Take-up during the quarter ended June 30 returned to the long-term average level, increasing to 1.6 million square feet from 1 million in the first quarter. However, there was no improvement in rents which have remained unchanged for over a year at 55.00 pounds ($85) per square foot.

"Media and technology companies tend to take-up the cheap seats around the north or west of the City," said James Roberts, head of commercial research at Knight Frank. "There is little activity still from the financiers and U.S. law firms that are prepared to pay the higher rents."

Deals included Practical Law Company acquiring 101,000 square feet at Friars Court, while Skype and Weber Shandwick signed a combined total of 154,000 square feet at 2 Waterhouse Square. Insurance firms have also been active in the market with Markel Corp. (MKL) signing 51,000 square feet at 20 Fenchurch Street--nick-named 'The Walkie-Talkie' and still under construction--and Jardine Lloyd Thompson Group PLC (JLT.LN) under offer on 290,000 square feet at The St Botolph Building.

Take-up levels are expected to remain steady at 1.6 million square feet for the third quarter, aided by possible deals for tech giant Amazon.com Inc. (AMZN) and insurer Kiln Group.

Supply levels are comparable with mid-2006 and the vacancy rate for the City is now 8.6%, below the long-term average of 10.2%.

Property investment rose to GBP2.5 billion in the second quarter, the highest it has been since the third quarter in 2007, and takes the first half figure to GBP4.1 billion, up from GBP3.2 billion in the equivalent period of 2011. Major deals included Hammerson PLC's (HMSO.LN) sale of its City offices portfolio to U.S. property company Brookfield for GBP518 million and Brazilian private investor Moise Safra's purchase of Plantation Place for GBP495 million.

"The majority of investment is coming from foreign buyers, particularly North America or dollar pegged currencies, who are concerned over the outlook for the global economy and view London as a safe haven," Roberts added.

-Write to Mark Shapland at [e-mail]

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