Are rental costs for London offices on the way up?
Well, yes and no
The headline office rent in pounds and pence is pretty much unchanged – See the latest update on our Office Rental Guide
But the rent free period that you might get at the beginning of the lease is shortening – especially in Central London.
Office Supply and Demand
During the recession, landlords generally had a difficult time letting their office space and had to persuade occupiers to sign up for a new lease by giving them have the first 4 to 6 months rent free
Apply the rent payable over the full period of the lease and then factor in the rent free element, and the average annual rent comes down
Now things appear to be on the up – here at Find a London Office, we are certainly seeing more activity on the London office space market.
As demand for office space increase, the amount of office space available reduces. Less office choice means more confident landlords, and ultimately shorter rent free periods will be offered.
So by applying the above calculation method, yes, rents are going up!
When the rent frees are reduced to a low level, then the rents per square foot payable per annum on the schedule will start to increase, and we think this will start to be seen in our next rental update in December