London's office market will see headline rents rise in its City location this year to £56 (EUR 64) per sq ft, and to as much as £98 per sq ft in the West End in 2011. This compares to 2009 levels of £47.50 per sq ft and £88 per sq ft respectively, according to international real estate advisor Savills.
London's office market will see headline rents rise in its City location this year to £56 (EUR 64) per sq ft, and to as much as £98 per sq ft in the West End in 2011. This compares to 2009 levels of £47.50 per sq ft and £88 per sq ft respectively, according to international real estate advisor Savills.
These increases are due to a decline in availability of new stock as the market moves into a period of record low levels of development completions which will support the investment market in 2010. Savills' research suggests that amid shortages of new prime stock in the City and West End markets, a flight to refurbishment will be followed by a development bulge.
According to the research, development completions will hit lows of circa 500,000 sq ft (46,000 m2) in the City of London in 2012 and in the West End in 2011, compared to average annual completions of 3.2 million sq ft and 1.8 million sq ft respectively.
Vacancy rates have already declined across the entire City market from 15.6% to 14.2% following about 4.5 million sq ft of take-up during 2009 and will continue to fall through 2010, Savills said. London's West End vacancy remains characteristically low at 6.7% at the end of December 2009.
'We anticipate a firm recovery in the City market this year closely followed by the West End in 2011. Headline rental growth will occur in both markets driven by shortages in new stock but we do not expect a boom in take-up as uncertainties in taxation, regulation and public spending will continue to hang over the wider economy at least until post budgets and election,' said Peter Thursfield, director of Savills city agency.