Office rents in central London have surpassed the peaks seen before the recession. Demand for office space in the capital is spiralling, according to a recent report by Savills.
Research indicates that companies must now spend an average of £55.44 per square foot to lease an office building in London, which has risen from £51.56 in the past year.
Increasing demand in London’s West End is driving up the average price of both commercial and residential property, as developers compete for a limited amount of available space.
In Mayfair, traditionally the most expensive part of London, rents hit £150 per sq. ft. in the first quarter (Q1) of 2015 – a record high.
Demand for office space is primarily being fuelled by the new technology and IT industries, which has caused rents to soar in the inner parts of London.
The average rent for the best spots of London’s financial district rose from last year’s record of £64.08 to £64.46 in Q1 2015.
In 2014, the City of London had one of its busiest years, with 8m sq. ft. of office space being leased. There were also some large purchases, such as Brazilian billionaire Joseph Safra buying the Gherkin building.
Savills’ Mat Oakley says: “The commercial property market bottomed in 2009 and it’s been growing ever since. Rents are higher than they’ve ever been, as there is a shortage of space.
“Until now, very few companies have had the opportunity to own their own building.”
But times are changing, he adds: “The Chinese developer ABP is building a new financial centre at the Royal Albert Docks and will be selling space directly to the occupier.”1
Demand is now growing in areas such as Hammersmith, Victoria, Earl’s Court and Vauxhall, and businesses are choosing buildings that will attract young professionals.
Head of Real Estate at PwC, Craig Hughes, comments: “Millennials want collaborative space – bike sheds over meeting rooms and being near leisure facilities.”1
1 http://www.landlordzone.co.uk/news/london-office-rents-at-record-levels