Rally running out of steam?
More commentary in the mainstream press today about the recovery in the UK’s commercial property market, particularly in the City, and how it may already be running out of steam. The Guardian cites a report out today from NB Real Estate saying that average rents for price office space in the City of London jumped to £53 per sq ft in the second quarter of 2010, from £47.50 a year ago. Rents have risen by nearly 12% in the first and second quarters.
The newspaper quotes James Gillett, director of City Offices at NB Real Estate, as saying: “Two successive quarters of such strong rental growth is without precedent.”
“Often the harder a market falls, the stronger it bounces back. Rents fell off a cliff post Lehman Brothers. We are now seeing them rebound strongly as demand from occupiers recovers and the supply of prime office space dries up.”
But the latest monthly index from CBRE indicates that the property investment market is slowing, the Guardian points out, while IPD data show that the growth in property values seems to be losing momentum.
James Young, head of Cushman & Wakefield’s City office, says the second quarter has been quieter than the first. He notes that growth in rents is being driven by a lack of supply rather than a big jump in demand. Young expects City rents to rise to £60-plus per sq ft in the next two years, and says they could even go beyond the pre-crisis levels of £65 per sq ft, the paper adds.
