Central London facing Grade A office shortage

Posted on by John Cronin

Central London is set to face its worst shortage of prime office space since 1980 according to a research report just published.

In a review of the commercial property market covering the first quarter of 2011, Capita Symonds is predicting a severe shortage of Grade A office space in central London over the next 12-24 months. Their central London office review suggests that despite a fall-off in demand, the London office market continues to buck the national trend. A limited supply of prime, vacant floor space and “a dearth” of new developments are reasons why the London market remains strong the report suggests.

The lack of supply of vacant floor space is also deemed to be a significant reason for rising rental prices. The report indicates that average rental prices are now £70 / sq ft in the West End and £55 / sq ft in the City. Over the next 24 months those rents are predicted to rise to £100 / sq ft and £65 / sq ft respectively. Over the previous 12 months rents for City offices have risen by 16%.

Midtown officeRental prices for the Midtown area (Bloomsbury, Holborn and St Giles) have also risen by about 18%. Such increases will be reassuring confirmation for commercial property developers like Hines, who last month announced a 70,000 sq ft speculative office scheme to be constructed in Holburn (pictured). Hines own research had also concluded that “Midtown will have very low levels of Class A supply” in 2012.

James Gillett, Capita Symonds says: “Those who took the plunge and invested in the central London office market over the last eighteen months have good cause to celebrate. The dearth of high quality office space which has been so key to driving up values and rental levels in central London is set to remain.”

The report concludes that availability is unlikely to improve in the near future, with only 1.7 million sq ft in total of new office space due for completion in 2011 and a limited pipeline of new, speculative schemes scheduled for 2012.


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