2008 job cuts would empty 2 London "Gherkins"

By Sinead Cruise - Analysis

LONDON (Reuters) - The City of London is set to lose enough jobs next year to empty its landmark "Gherkin" skyscraper twice over, putting pressure on the office market in this global financial hub.

The industry expects prices and rents to fall, but consistent tenant demand suggests the market in the capital's main financial district will survive a such a slowdown. Deeper job cuts, though, could spell trouble.

Britain's Centre for Economics and Business Research (CEBR) foresees 6,500 London financial service sector redundancies in 2008. Based on industry estimates of between 100 and 150 square feet per employee, available office space could surge by as much as 975,000 square feet, increasing pressure on City property prices and rental income growth.

"The loss of 6,500 jobs will naturally slow down the market ..but the supply side is still tight enough to stomach such an eventuality," said Alastair Hilton, partner at property services firm Cushman & Wakefield.

The City has capacity of about 58 million square feet, equivalent to over 100 times the floor space of the so-called "Gherkin", a distinctive 180 meter tower completed in 2004.

Industry figures put the City-wide vacancy rate at 10.7 percent.

Players say that if job losses escalate beyond the expected level, an overhang of supply could tip the district into a more severe commercial property recession.

And with more than half a dozen developments due to spring out of London's crane-filled skyline by 2010, they accept that the market has entered its most risky phase.