A recent report has suggested that a lack of supply and increasing occupier demand for office space in London is set to lead to strong rental growth in the West End.
According to the December 2010 West End Offices Update report from a leading chartered surveyor and property consultant, investors are demonstrating their confidence in the market.
John Wood, head of the consultants commercial division commented ‘Whilst occupier demand continues to improve in the West End, incentives are falling, with rents moving up across most areas as reduced availability becomes increasingly evident. Prime rents are now at £90 per square foot with hedge funds continuing to fuel this end of the occupier market.’
‘Availability of Grade A space continues to fall and the decline in new supply projected over the medium term will further restrict availability. With many lease expiries due over the next two years and a drop in supply over the same period, the market is likely to continue to favour landlords, with further upward movement of Grade A rents as occupiers fight for quality office space,’ he explained.
The report shows that West End availability fell by 9% and take up rose by 28%. Headline rental figures moved up, with the prime rent now at £969 per square meter. The volume of transactions was also up by 10%, totalling £1.69 billion.
John Wood also added ‘We forecast rents will average in excess of 8% per annum growth over the next four years. Investment activity in the West End continues to improve. Prime yields have shortened as cash ready funds back major investments in the West End. We forecast a further 50 bps inward yield movement over the next four years,’
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