Chris Lewis, Head of Office Agency and Consultancy at DeVono Cresa, sees a period real opportunity ahead for occupiers during 2018.
It’s hard to think of a time when the market had more to be worried about. Political uncertainty at home (and abroad), economic turbulence and business sentiment erring firmly on the side of caution. A set of conditions that would in any other time point firmly to a property market skewed to benefit tenants. So what’s the reality?
The truth is that prime office rents have held up across many of the central London office submarkets, recording on average 1.4% increase since the end of 2016 – as demand remains strong, with occupiers showing a deep commitment to London. However, it is in the traditional areas such as Mayfair that rents have come under pressure falling by 11% over the same period to £125.00 per sq ft.
In the City, a similar such picture has emerged with the core location of Moorgate also registering a fall in the top rents, by 3% to £72.50 per sq ft. Prime rents in Victoria, Soho and Canary Wharf, for example, have seen zero growth with increasing incentives taking some of the strain. Despite this, rental levels are on average 40% higher than in 2008.
Not all areas are seeing prime rents being chipped away with Paddington, Hammersmith, Covent Garden and Clerkenwell notching up some growth over the past year (19%, 7%, 4% and 2% respectively). These submarkets have sustained occupier demand, most of which are non-traditional core locations, appealing to a greater audience. Nevertheless, 2018 could see downward pressure on prime rents across central London; already our research suggests that rents in the New Year have edged downwards by an average 0.5% since last quarter.
This trend could well continue, largely as a result of a relatively high volume of new supply coming to the market, stubbornly high vacancy rates and continued uncertainty surrounding from occupier demand. Layered on to this trend is the ongoing disruption which is being caused as a result of businesses looking to satisfy their space needs through co-working and flexible office solutions. So, we look forward to 2018 with optimism that the conditions for our clients to benefit from great deals in exceptional buildings will continue.
The Occupier Talks #01: The London Office Market Q1 2018
Head of Office Agency
& Consultancy |