A projected increase in prime rental rates for London office properties in 2010 is helping make up ground lost to drastic declines in 2009, signaling a return to stability. Occupancy rates for office space are continuing their rebound with significant gains fueled by Asia Pacific commercial customers. See the following article from Property Wire for more on this.
The office property market in central London has experienced rising take-up in the third quarter of this year suggesting that the rally recorded in the second three month period has extended and gained momentum, according to provisional figures just released.
City take-up increased by 80% quarter-on-quarter to 1.8 million square feet, the largest recorded quarterly take-up for two years in the City, and ahead of the long-term average of 1.6 million square feet per quarter, the provisional figures for the City and West End office markets from Knight Frank shows.
City availability rose by 4.5% to 14 million square feet although Knight Frank forecasts the peak for City availability will now be reached in the next three to six months.
It is strong activity by Asia Pacific financial groups and insurance firms that is supporting the market at present.
The report predicts that City prime rents are forecast to rise by 4% in 2010 to £44.00 per square foot, having fallen 21% in 2009 to £42.50 per square foot.
The West End also performed well with take-up a quarter-on-quarter rise of almost 50% to levels in excess of 800,000 square feet, the highest quarterly take-up figure for 12 months.
West End take-up is still below the long-term average of 1.3 million square feet, although there was a notable up-take in activity towards the end of the quarter.
West End availability remained static at 8.6 million square feet, showing a vacancy rate of 9.6%. The report forecasts that availability is at or near its peak.
Having fallen 30% in 2009 to £65.00 per square foot, West End prime rents are forecast to remain at this level until the end 2010 where a rise of 3% to £67.00 per square foot is forecast.
‘These figures are certainly better than one would have expected back in the spring, and it looks like the market is now through the worst.
We are not out of the woods yet, but given the encouraging economic news over the summer months, particularly in the financial markets, I think this is the start of a move back to normalized market conditions,’ said James Roberts, Head of Central London research at Knight Frank.
Overall it means that the window of opportunity for a tenant to secure the very best deal is narrowing although the market is still in their favor for now, the report concludes as supply could dwindle rapidly for large units of new build space in the next 12 months and in 2011 and 2012 options for quality space will likely be limited due to the lack of recent development starts.
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