Cost of renting London offices rises by 8.5%


London office space is commanding higher rent as the UK capital sees a shortage in the number of office buildings available.

The decreasing amount of office property is the lowest seen in central London for seven years.

As the economy recovers, demand in London office space has grown, and there is no supply to meet it.

Many property buyers are seeing this demand as a good opportunity to buy London offices.

Despite the risk some firms seem to be taking advantage buying offices with leases close to expiring. The value of these offices rose by nearly 20% in value in the year through to June.

Buying properties with leases nearing their end is risky as current tenants could move out leaving the landlord without income.

In 2013 Blackstone bought the Adelphi Building, situated close to London’s Trafalgar Square for around £260m in part because a lease on half the building ended last summer.

Investment Property Databank managing director, Phil Tily, said: “Growing occupier demand for space in London is encouraging investors to look for assets that they can actively manage to generate higher income returns upon tenant expiry.”

London’s West End still remains the world’s most expensive for office space. Cost per sq ft of office in London is 14% more than that of Hong Kong, the second most expensive location for office buildings.

By: Kirsty MacGregor

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