The outlook for the commercial property market in offices this year will be a tight squeeze, but will still bode well for

investors, says the latest research report by international property consultants King Sturge.

With the UK economy expected to experience a modest slowdown this year, the office market is likely to show slower rental growth, but without giving any cause for concern.

One of the main trends is likely to be an increase in demand for out-of-town business park space, as a shortage of office accommodation in traditional city centres becomes more pronounced.

A tightening of supply means that vacancy rates are at their lowest levels for five or ten years in many city centres.

The average rate last year was around six per cent, but some locations, such as Bristol, are certainly feeling the pinch, with vacancy rates of around three per cent or below.

In Southampton, both in-town and out-of-town supply dropped considerably through 2000 and the trend is continuing in the early part of 2001.

Available stock in the city centre is now approximately eight per cent following a take-up of approximately 18,127 sq m (195,000 sq ft) in 2000, up from 14,405 sq m (155,000 sq ft) in 1999.

Out-of-town take-up was 22,304 sq m (240,000 sq ft) and 6,040 sq m (65,000 sq ft) respectively for the same periods.

Martin Hastelow, head of offices at King Sturge, South-ampton, said: "Without exception, stock availability in both in-town and out-of-town

locations has reduced. Notably in some cities vacancy rates are now down below the levels of the 1980s - you could say that we are almost running on empty."

As a result of tightening of supply, prime rents reached record levels of £20 per sq ft at Liberty House in the city

centre and out of town, £17.50 per sq ft and £16.50 per sq ft at Link 414, Eastleigh, and 1300 Parkway, Solent Business Park, respectively.

Despite this, very few speculative schemes are coming on-stream.

There is currently no speculative space under construction in the city centre and out of town there is approximately 14,879 sq m (160,000 sq ft) under construction.

This includes Prudential's Forum One at Solent Business Park, comprising 6,505 sq m (70,000 sq ft) and City Estates' Wootton House at 1,637 sq m (17,621 sq ft).

The shortage of good-quality available stock is resulting in a number of pre-lets in the out-of-town market, however not all companies are able to plan ahead to take into account the long lead-in time required in the office development process.

Martin Hastelow adds: "We are concerned that this raises the risk of market lock-up, stagnation and the possibility of major corporates fulfilling their requirements on mainland Europe."

Overall, however, King Sturge believes that 2001 will be an encouraging year for investors with continued limited stock and choice for occupiers.