The London office space market is one of the most important commercial property markets in the world. With such a high volume of office space and with so many major companies having a presence in the capital, many will be keeping a keen eye on it in 2010. Under the pressure of the recession, rents and capital values have tumbled from the heady days of the 2007 boom. In areas such as the West End, rents have fallen by as much as 40%, with the overall fall in London office rents estimated to be around 28% in 2008.
Although the market is widely believed to have “bottomed out now”, there is no chance of rents returning to 2007 levels for a good while yet. The current recovery bubble is being fueled by rock bottom prices and cash rich overseas investors who are looking to make acquisitons while prices are favourable. But large corporate lettings are few and far between, meaning there is no consistent driver of demand in the market, pushing for new space. Rents are recovering slowly, aided by a lack of new buildings being built. But this is at a painfully slow rate for commercial property agents – some estimate it could take upto five years before rents recover to 2007 levels.