The supply of office space in London is at its lowest level since September 2001 according to research from Jones Lang LaSalle. Meanwhile, demand is at its highest since September 2002 and rents are on the rise, particularly in the West End with increases expected in other parts of London.
According to JLL's Central London Market Report, the first quarter of 2007 saw almost 200,000 m² let in central London, almost all of which was in the West End and City. The banking and finance sector was responsible for a third of all these deals and the firm expects this sector's continued expansion will drive the market forward over 2007 and beyond.
Overall supply fell by 12% across London in the first quarter. Little speculatively developed space was completed and, particularly in the City, almost all the take-up was of existing buildings. With 262,300 m² currently under offer, supply will fall further says the firm and, significantly, 49,000 m² of that total is for prelet space.
Demand from the high-rent-paying banking and finance sector is increasing and putting more pressure on prime rents, which increased by 2.6% to £1,050 (€1,536) per m² in the first quarter. There is even more pressure on small units and rents exceeded £1,184 (€1,732) per m².
In the City deals done and deals under negotiation in tower space point to rents between £673 (€984) and £710 (€1,039) per m² becoming more common this year says JLL. Prime rents in the Docklands market have remain at £484 (€708) per m².
Meanwhile JLL says London's investment market saw £4.2 billion (€6.14 billion) traded in the first three months and more investment records are expected to be broken this year.
Source: Jones Lang LaSalle