Rental expectations for London offices are dramatically high, leading experts to predict that rental prices will continue to soar.
This prediction comes as rental expectations have significantly rose in the London office market, compared to Q4 2007 and in fact this is the first time in 2 years that surveyors have reported a rise.
These predictions come from a report by the RICS (Royal Institution of Chartered Surveyors).
Oliver Gilmartin, RICS senior economist, said, “Demand has greatly lifted rental expectations for London offices where development has floundered in recent years due to a dearth in development finance.”
Prices for office space in London are actually 57% higher than expected, making it the largest increase on record.
These figures are surprising considering that in other U.K. cities rental prices have not seen such a significant rise, and in fact are lower than expected.
There is also evidence suggesting that increased demand is not the only cause of increased rental prices.
Mr Gilmartin went on to say, “There are some signs that a lower pound and a gradual rebalancing of the UK economy towards greater export activity is starting to feed through into industrial lettings activity most notably in London and the South.”
He also expects that the recent price gains may just be short term, and may level off by 2011.
In fact Mr Gilmartin said, “The stronger the price gains this year the less scope for further rises in 2011 without a corresponding rental recovery.”