Lease prices hit highest for 22 years in London.
2010 saw massive rise in London office space rental prices.
London saw the largest annual increase in office leasing for 22 years during 2010.
This was mainly due to a resurgence of demand among corporate occupiers mixed with a limited supply of new office buildings.
In the Square Mile office district there was a rental growth of 25 percent during 2010 with lease prices reaching £55 per square foot. This is the largest increase in rental prices that the city has seen in 22 years.
“After a significant slowdown in the face of the financial crisis, the London market has bounced back in terms of both occupational and investment markets. Although we are not expecting rents to continue at the pace seen in 2010, we do expect double-digit rental growth again in the City,” commented Anthony Duggan, head of research at Drivers Jonas Deloitte.
Two large deals from UBS and Bloomberg helped to boost the figures last year. However, it seems that the main factor was a general lack of prime office space particularly for larger corporations. This led to companies paying more for any quality office space that was available on the market.
This lack of supply is expected to keep office rental prices high this year due to a lack of developments in the pipeline.
“There are just two buildings completing this year that can offer over 100,000 sq ft; the Heron Tower and Hines’ Cannon Place. If you are a large occupier with a lease event in 2012 or beyond, your options are severely limited and agreeing a pre-let now may be the only way to get a building,” commented Anthony Duggan.
With a vast majority of developments expected to be completed by 2013 it seems that this will be the year that occupiers can negotiate for lower rental prices again. However, for now the lack of available offices and the high volume of companies searching for space means that lease prices will likely stay expensive.