Drivers Jonas Deloitte’s end of year statistics show 25% prime rental growth

“2010 – best year for the City in 22 years”

Article posted: 10 Jan 2011

The latest end of year statistics from the Drivers Jonas Deloitte research team reports that the City of London recorded prime rental growth of 25% in 2010, with rents reaching £55.00 per sq ft at the year end. This is the largest annual rental increase in the City for 22 years.

The dramatic rise in rents is being driven by a lack of suitable prime Grade A office space in the Square Mile, in particular for occupiers looking for larger tranches of space.

Anthony Duggan, head of research at Drivers Jonas Deloitte, says: “City rents have recovered quickly and rents are now back up to £55.00 per sq ft for a typical Grade A letting of 10,000 sq ft. This bounce-back isn’t surprising given the level of tenant activity and increasing shortage of prime space.”

Take-up data for the City also highlights the strong performance in 2010 with just under 6m sq ft transacted – the highest level of leasing activity for 10 years. Figures were boosted by two large pre-lets during the second half of the year. UBS’s pre-let of 700,000 sq ft at 5 Broadgate is the second largest pre-let in the City. This was closely followed by Bloomberg agreeing terms to pre-let 550,000 sq ft at Walbrook Square.

Office space in the West End has also performed well with rents of £85.00 per sq ft at the end of the year, an increase of 21%. Take-up in the West End also bounced back; increasing 14% year-on-year. There was strong leasing activity outside of the typical core West End with ‘north of Oxford Street’ the most active submarket.

Given the strong performance of the occupational market it is not surprising that investment markets in London have performed strongly. In particular the £3.6bn transacted in the West End during 2010 is up 70% on the volume recorded the previous year: for the first time since Drivers’ records began in 1999 the West End recorded a higher volume of investment transactions than the City.

Duggan continues: “After a significant slowdown in the face of the financial crisis, the London market has bounced back in terms of both occupational and investment markets. This performance should keep London at the top of most investors’ wish-lists and, as we are already seeing, convince developers to start building again.”

Posted by Aree