West London office rents to continue rising – Jones Lang LaSalle
Jones Lang LaSalle says 2012 was a solid year for the Western Corridor office market, with total take-up of 2.0m sq ft across the market. This was in line with the five-year annual average, the firm says.
In the West London offices sub-market, annual take-up was robust at 1.15m sq ft, compared with the five-year annual average of 963,500 sq ft. This was boosted by two major deals – the Aker letting at Chiswick Park and IMG acquiring 5 Longwalk on Stockley Park, says James Finnis, head of South East office agency at Jones Lang LaSalle. These deals show the continued occupier preference for Grade A space, he notes. Take-up of Thames Valley office space, by contrast, was 22% below average in 2012, at 843,900 sq ft.
Supply across the Western Corridor region rose by 7% year-on-year, driven by the release of secondhand Grade B properties in the Thames Valley. The shortage of Grade A space has continued in West London, where the Grade A vacancy rate remains just 2.9% despite a number of speculative schemes completing during the final quarter of 2012. The development pipeline is not filling the gap, JLL says: it contains 540,000 sq ft of speculative schemes across the Western Corridor and due to complete this year. Limited starts on site are expected beyond this, “particularly impacting on the already undersupplied West London market,” JLL says.
“This mismatch between supply and demand is feeding through to rents and we are forecasting further rental increases in a number of undersupplied locations,” James Finnis notes. Prime rents in the Western Corridor rose by 4.8% y/y on average in 2012 – driven by West London offices to let, where rents increased 8.8% over the year.
Jones Lang LaSalle is encouraged by an increase in active demand during the final quarter of 2012, which was up 42% year-on-year, and which it says appears set to continue. Angus Minford, director of national investment at JLL, says the Western Corridor market is now attracting healthy interest from a wide range of investors seeking assets of varying risk profile, in the out-of-town and in-town markets. “The focus remains on specific locations. We expect investor appetite to continue to grow over 2013 as the imbalance between the limited supply of Grade A space in key locations and growing occupier demand increases,” he adds.
