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Construction growth wanes, rents go up

Expense financing and large loan guarantees required by funding institutions might significantly cut down the office spaces expected for next year.

Financial instability leads to construction deadlines being postponed indefinitely or construction pace slowing down, which would have rent rises as the immediate consequence. Yet, not for just any type of construction, but for fast-access spaces with plenty of facilities, EuroMetropola experts say, according to whom unless the financial market stabilizes, as of 2009, there is a big chance for incipient-development projects not to get made anymore, Agerpres reports.

Expense financing and large loan guarantees required by funding institutions might significantly cut down the office spaces expected for next year, thus reducing the chance for the demand to match the offer in 2009, EuroMetropola representatives say.

‘A phenomenon already existing on the office project market we will increasingly see in 2009 is developers will begin erecting projects only after they had made sure they have enough pre-rent contracts, a measure aimed at diminishing investment risk. In many situations, pre-renting to solid companies provides developers with the opportunity to continue charging high rents,' experts say.

So far, office space rents, the segment least affected by the global economic situation, have not been revised down and the outlook remains upbeat. ‘The pre-renting of new project space a year before the construction is ready sheltered the office sector this year, but in the coming period too, given the majority of rent contracts are of between three to five years,' EuroMetropola consultants said. Actually, amid the financial crisis, it was noted since as early as last summer that many company have been more restrained over activity expansion plans, notably small companies for which business development appears uncertain.

 

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Tags: construction office rents

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