Office supply squeeze will continue to drive Central London Market Recovery

CBRE predicts rising rents for office space over next few years, peaking in 2014

Article posted: 09 May 2011

After a strong rebound in take-up and rents in 2010, the office space market in Central London slowed in early 2011 but CB Richard Ellis believes the cyclical recovery will continue with availability falling and rents rising over the next two to three years.

Speaking at CBRE’s Central London Market Insight seminar last week, Peter Damesick, EMEA Chief Economist, said: “The key driver will be the supply squeeze in Grade A offices with completions of new space falling to a historic low in 2012.”

Damesick noted that identified requirements for Central London offices were 10% higher, at 11m sq ft, in March 2011 than a year earlier and that a high level of lease expiries will occur in the next few years.

Damesick commented that: “The economic background to the market is challenging in the short term, with headwinds from UK fiscal austerity, higher oil prices and the Eurozone debt crisis. However, the prospects for Central London hinge on its role as a global financial centre and are much more geared to trends in world investment and trade than to the UK domestic outlook.”

Peter Damesick said: “Despite concerns over higher tax and tighter regulation, London retains very powerful competitive advantages as a global financial centre. We expect job growth in its financial and business services over the medium term linked to this enduring global city role.”

CBRE’s forecasts for both office space in the City of London and the West End show prime rents reaching a peak in 2014 when they will meet increased supply from the new development cycle now getting underway.

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Posted by Sara