- 2 Minute Read
- 19th November 2009
Bargain office rents in London
The global recession will continue to push down office rents in major commercial centres and London is no exception. During the real estate boom, prices for office space in London were among the most expensive in the world.
Despite some tentative signs that the economic downturn is levelling off, projections for office space cost in 2009 and 2010 continue to indicate dropping prices. A survey by Jones Lang LaSalle reveals that demand for office rents is still declining and there is a lot of new space still entering the London market. Prime headline rents for the City of London, currently at about £65 per square foot per year, are projected to be only £50 per square foot by the close of 2009. Prime West End rents have fallen by more in the last quarter of 2008 than in any time since the 1990s recession. Rates are expected to drop to £80 per square foot in the West End by the end of 2010.
The banking sector is an important factor in the commercial rents market because of the large amount of office space it consumes. With the government taking over institutions like HBOS and the Royal Bank of Scotland we can expect that demand from banks will continue to decline. The legal sector has been picking up in the London office market, but most other business sectors are following the lead of banks and cutting back on rental space.
With the economy still expected to perform slowly at best through 2010, businesses will continue to downsize or hold their budget when it comes to office space. This will mean that landlords will find themselves overloaded with empty offices. Since the market for selling such space is also very weak, there will be great pressure on landlords to reduce prices.
Despite the surplus of empty offices, new construction seems to be continuing at a fairly brisk pace. This may be related, at least partly, to the 2012 London Olympics. Low building costs are another factor making office space developments attractive for long term investors.
The opening of new office buildings, of course, will only increase the downward pressure on office rent prices. Owners are forced to open up availability to tenants that they might not have considered before. Indeed, it seems no matter where you look in London there are great deals packed with incentives for prospective tenants. Incentives in the West End, for example, have tripled over the last year according to Commercial Property News.
The Jones Lang LaSalle projections indicate a modest recovery in the office rents market should start in 2011, and we can expect some increase in prices and availability at that time. However, businesses looking to pick up office space over the next two years have an abundance of bargains to choose from across the entire London landscape.
A quick not from our London Specialist, Lacey Babai:
“I've been helping clients find office space in the London serviced office Market for over 6 years now and can comfortably say that the current climate has presented deals and offers that were literally unheard of 12-18 months ago.
There are some exciting new buildings that have either just opened or are about to open within the next few months in the West End and the City which are offering introductory rates.
I am confident that we will have a solution for every requirement due to the relationships we have built and huge range of available options.
Please call me today on 0208 909 5222 to get the ball rolling with your search. I personally will guide you through the process step by step from listening in depth to your specific needs, providing you with a shortlist of properties, arranging viewings and finally negotiating the very best terms on your behalf.”