Low supply to push London office rents up

Source : Business Times – 22 Sep 2009

Prime areas will return to growth next year as global markets rebound

Prime rents in London’s City and West End office markets will return to growth in 2010 thanks to flourishing global stock markets and a rebound in tenant demand this summer, property advisor Knight Frank said yesterday.

A sudden drop off in speculative office developments due by 2012 and smaller-than-expected occupier distress in 2009 supports forecasts of a 4 per cent rise in prime City rents to £44 per square foot and a 3 per cent rise in West End prime rents to £67 per square foot in 2010.

City rents, down more than a fifth in 2009, are expected to rise by 37 per cent to £58 per square foot by end-2012.

West End rents, down 30 per cent this year, are set to rise by 42 per cent to £92.50 per square foot over the same period.

Knight Frank said the rapid rent repricing has tempted occupiers back to the market in an effort to exploit the tenant-friendly environment.

In real terms, City rents are at their lowest level for more than 20 years, while West End rents are at a 13-year low, Knight Frank said.

‘The office market is beginning to emerge from the shadow of the banking crisis,’ said Bradley Baker, head of central London tenant representation at Knight Frank.

‘Large Central London tenants from a range of industries are viewing this as the ideal time to act to secure the best deal,’ Mr Barker said.

‘In the large unit market I see the number of very good quality building options diminishing in the next six months,’ he said.