Central London office rent is on the move…
We predict an increase in Central London office rent of between 5% and 7.5% by end of 2013
Micheal’s post on 5th November reported London office rents remaining static, but rent free periods were reducing, adding to the overall cost of renting office space. This shift is very often a precursor to imminent increases in rent.
In our next update to the Central London rental guide – to be published on 28th December – I predict we will be reporting rental growth in all 18 London office locations , from Silicon Roundabout in the east right the way through to Paddington to the West.
London Office Rent: What are the major landlords saying ?
British Land, one of the major central London office landlords has reported property values in the West End increasing 6% in the 6 months to September. They have filled their large office development in Brock St by Euston, with a major letting to Facebook. Their City offices, including the Cheesegrater, are also on the up.
Important: increases in value do not correspond solely to rent increases. With a large appetite from investors to buy property assets in Central London, increases in value also reflect a downward yield shift – where investors are prepared to pay higher capital prices for a the same rental income.
Another huge central London landlord, Derwent London have also reported they expect rents to rise between 4-6% this year. Their buildings are an interesting barometer because they are often situated in more down to earth locations, outside the prime core.
And at Find a London Office…?
At Find a London Office, our experience on the ground is that demand for space is increasing and the supply is reducing, as better economic news began emerging over the summer. Recently, we had a PR client interested in Marylebone office space, where the quoting rent was £50.00 per sq ft. We had to compete with 4 other tenants wanting exactly the same space. And in order to win the competition, we had to offer the quoting rent on a 3 year lease with no rent free incentive. Anecdotal evidence, certainly, but it certainly chimes with the broader economic trends as well as the views of the major landlords.
Of course, it is impossible to predict the future. Put 5 economists in the room and ask them about next year, and you’ll get 5 different answers! However there certainly seems to be a growing body of evidence to suggest that the Central London office market is on the move.