Middle Eastern investors predict that rental growth will return to London, but that it will be due to under-supply rather than increased demand.
Asteco, a Middle Eastern real estate firm, has released a report that predicts the under-supply of office space will cause a fury of companies renting Grade A space.
The report also suggests that this growth will increase further as there will be less and less London office development projects, due to a lack of financial backing.
The Asteco report, published April 20th, states that “In the West End, because of the less volatile development pipeline, the scarcity of new stock will start to become a problem next year.”
However the report then goes on to say that the “scarcity of suitable buildings is already becoming an issue.”
It is thought that, where this is the case rental growth will quickly emerge, despite the fact that there is little demand for space in those areas.
The report suggests that the first area to be affected will be the City office market especially those spaces that exceed 100,000 square feet and are Grade A quality.
Savills Research, London real estate experts, have speculated that this will mean that the West End, in particular, Mayfair and St James’s sub markets will see the first signs of rental growth.
As a result the report, based on data by Savills Research, suggests that by 2011 there will be definite recovery in the West End sub-markets and that by the end of 2011 the market will be firmly recovered.