Supply of office space set to ease
The supply of grade-A office space is expected to slacken substantially in the next few years after a glut of new space in the past couple of years.
According to analysts, a record eight million square feet of new grade-A supply flooded the market last year, and a further four million sq ft was forecast to be offered this year.
Vacancy rates in Central have ballooned to about 15 per cent over the past two years while rents tumbled by more than 50 per cent, taking into account rent-free periods since the height of the market in 1997.
According to FPDSavills, new grade-A space due in 2000 would drop to 1.3 million sq ft, while new supply in 2001 would be about 1.9 million sq ft.
Property analysts say that in 2000-03, the amount of new grade-A supply will fall significantly.
According to a report from Morgan Stanley Dean Witter, overall vacancy rates in the long run are expected to drop to as low as 10.4 per cent by the end of 2002 thanks to increased take-up.
The report expected supply and demand to be well balanced in coming years and a fall in vacancy rate could 'lead to a modest upside movement in rentals and prices'.
Other analysts say space on the market and vacancy levels mean new space on the market in the next few years will not be absorbed easily.