Report heralds start of recovery in Central London commercial property

Capita Symond’s Central London Office Overview reports demand for grade A office space outstripping supply in 2011

Article posted: 14 Jan 2011

Figures released by Capita Symonds have revealed that the central London commercial property market began to recover significantly in 2010, with rental values rocketing and demand for grade A space far outstripping supply - despite a gloomy Q4 which ended with a sharp fall in take-up of offices in central London markets and little movement in rents.

In terms of rental values, there was an overall rise across the capital in 2010 of 14%. The parts of London with notable rises include the City, where headline rental values increased by 25% from £42.50 per sq ft in December 2009 to £53.00 per sq ft in December 2010, and at offices in the Docklands where headline rental values have soared by 33% from £30.00 per sq ft in December 2009 to £40.00 per sq ft in December 2010.

Although the take up of office space in central London fell sharply in the last quarter of 2010, with rents also stagnating, prime rents are stable or rising in all sub-markets and investment volumes have started to increase, driven heavily by overseas investors.

Meanwhile vacancy rates have fallen with an overall drop across the capital to 8.0% from 9.1% in 2009. In particular, inner London office availability decreased by 12.5% in 2010 with the largest percentage decreases being seen at offices in Midtown (26%) and office space on the South Bank (17%).

With regards to 2011, the marked disparity between high demand for grade A space, heavily driven by stock shortages, and inertia in the rest of the market that has been such a feature throughout 2010, is set to continue into this year and beyond.

The fortunes of individual central London markets have also varied widely during 2010 with the City and Midtown markets registering a much stronger recovery than offices in the West End.

Posted by Daniel