'You can't see people putting spades in the ground again until they can achieve a pre-let. When might you get that rent again? It certainly won't be before the end of 2010, beginning of 2011,' said Mike Sales head of property investments at Henderson Global Investors.
A lack of demand for office space has delayed construction of several major projects in London's City financial district, including British Land's Leadenhall skyscraper, dubbed the Cheesegrater, and Land Securities' 'Walkie Talkie' office tower.
Many similar office development sites have been stopped at the foundations stage to avoid unnecessary building costs, while the outlook for the world economy continues to depress sentiment among prospective banking tenants.
'What you'll see is the space in buildings that can't be stopped coming out, and that space being gradually absorbed by the market. Then you'll see a lull in the development pipeline, which of course creates an opportunity in the future when supply tightens,' explained Sales.
Sales added that he believed the UK commercial property market was likely to hit bottom at the end of 2009, having so far suffered a 44% correction in average values since June 2007.
He said Henderson is raising capital for its second central London office fund to take advantage of the repricing, although he admitted City of London office rents were still in freefall.
Prime rents in the district, where thousands of financial sector workers have lost their jobs in the past year, were unlikely to return to peak levels for several years, he said.
'Realistically, when are we going to get back to the rents we saw at the top in 2007? It's not going to be for five years,' he said. He estimated a peak-to-trough fall of about 50%.
