Irrational exuberance: the impact occupier space on the UK market

During the late 1990s and early 2000 the Central London and South East office markets witnessed increasing levels of occupier activity. Most of this activity came on the back of continued strong economic growth, rising stock markets and a belief that growth would continue. Occupiers in sectors including Investment banking, technology and telecommunications, expanded to meet growing demand, and accommodating for future growth, leading to numerous pre-lettings of space in excess of 46,450 sq m. Following the collapse of the equity markets and economic slowdown, in what can now be considered as irrational exuberance, occupiers have been left as accidental landlords holding significant amounts of space, now surplus to requirements. In previous markets Investors and developers have controlled much of the space on the market. The current situation is somewhat different, with occupiers within City and Docklands controlling in excess of 70% of prime space on the market. As a consequence, this paper will review the market trends over the past two decades and consider the differences between the previous market cycles. This paper will then consider the reasons behind the release of space by occupiers, before investigating in more detail how this cycle differs from those in the past and the specific reasons for this. Finally, the paper will review the current and likely changes in business practice and the consequences of this for the market, both now and in the future.