Buoyant London office market to continue – Jones Lang LaSalle
Rental growth in the market for available office space in Central London will be driven by a lack of grade A space this year, with Jones Lang LaSalle forecasting that West End office rents will reach around £95 per sq ft in larger units and above £100 per sq ft in smaller transactions. In the City, the firm expects rents to rise above £60 per sq ft this year, and says that before the end of 2013 we could be seeing the return of pre-recession rent levels, at around £66 per sq ft.
Rents rose nearly 18% last year to £88.50 per sq ft for West End offices to let, and jumped 22.2% in the City to £55 per sq ft, JLL says. Continued activity in the advertising PR and publishing sectors is expected to sustain the West End market this year. Small and medium-sized financial services occupiers are also showing early signs of demand, the firm notes. Jonathan Evans, Head of West End Agency and Development at Jones Lang LaSalle, said: “Occupiers will be chasing limited supply; grade A office supply fell 32% across London in 2010 – the most rapid reduction since 2000 – and this will continue to support growth.”
In the City, new speculative starts had been expected last year but failed to materialise, so new schemes will be delayed beyond 2013-2014, encouraging further rental growth in the Square Mile “as there will be limited choice of good Grade A new product for the next two years at least,” said Dan Burn, Head of City Agency at JLL.
Jones Lang LaSalle’s new research on the commercial offices market in London notes that investment last year in the West End was up 77% year-on-year at £5bn, dominated by foreign investment (63% of all deals). In the City, investment in office space leapt 149% year-on-year to £1.7bn, again driven by overseas investors (70% of all sales).
