Overall rental growth in Q1 2019 continued in the same vein as 2018 with subdued growth of 1% across all central London submarkets. Whilst the majority of submarkets saw no movement over the quarter, there has been some noteworthy changes.
Over the course of 2018, prime Grade A rents in the Mayfair-St James’s submarket reduced by 8%. This level has since ticked up by 2% to £117.00 per sq ft at the end of Q1. Another West End submarket, Paddington, has seen prime Grade A rents move to a high of £77.50 per sq ft. New stock in this location is fuelling rental growth and has contributed to the 15% rise in a year.
Other areas to see Grade A rental growth include the eastern fringe of the City (3%) and the Southbank (4%). Yet it is the Docklands market that has seen the greatest shift upwards, with a rise of 5% to £50.00 per sq ft. Whilst there is a substantial amount of secondhand space available in this market, new Grade A space is limited at present. A number of new developments including Wood Wharf are progressing with their development.
Prime Grade A rents in the Hammersmith office market have decreased by 2% over the course of Q1 to £55.00 per sq ft. This is the first such drop since 2009, having had a long-run of growth. Reduced demand and significant volume of availability has meant that rents are being chipped away.
Our research shows that prime Grade B rental levels in Midtown and the Southbank have increased over the quarter. In Midtown, Grade B space is now at £60.00 per sq ft, back up to the same level last seen in Q1 2017. Movement of rents on the Southbank now mean that Grade B at £55.00 per sq ft is a new high and now en par with space in the City.
Walking around central London you would be hard pushed not to notice the increasing number of towers. Office space in these tall buildings have always had a premium attached to them. The growing number of new towers are attracting a diverse range of tenants. Whilst we have tracked these premium rents, we now include this series on our rent map (featured). Our tower space rents are split between mid-rise and high-rise. Mid-tower space currently commands £76.50 per sq ft, a rise of 2% over the quarter. Whereas, upper floors are pegged at £82.50 per sq ft. Yet, space at the top of towers will generally be higher – in rental value!