Lack of new developments and prime stock of London office space means that the commercial property market will face its worst Grade A office shortage since 1980.
The lack of supply means that office rental prices are expected to rise with headline rents set to reach £100 per square foot in the West End and £65 per square foot in the City by 2012.
Over the past 12 months rental prices in the City have increased by 16 per cent and Midtown rates also rose by 18 per cent. Almost every central London property sector has dropped. Availability of West End office space is down 14 per cent and availability of office space in Midtown and Docklands has dropped over 20 per cent.
A spokesperson for a leading property company, commented: “Two years ago this situation would have been unthinkable. Companies were in a great position with a surplus of good space resulting in aggressive financial offers from landlords desperate not to lose tenants. For businesses looking to move, those days have passed – the boot is firmly on the other foot.
“Consequently, occupiers need to consider their options very carefully. Some may be tempted to seek lease extensions for the next two to three years in the hope that supply line will improve. Others may look to move all or part of the business outside the central areas, which could be good news for the Southbank and Midtown as well as more fringe locations offering good quality stock such as Stratford, Greenwich and King’s Cross.”
Commercial office space news brought to you direct from DeVono Cresa, experts on London office space.