Central London Office Space Prices Set for ΓÇ£Strong GrowthΓÇ¥
The price of office space in Central London will show ΓÇ£continued strong growthΓÇ¥ in the next two years according to commercial agent Knight Frank, with the imbalance between demand and the supply of quality office space helping to drive office prices onward and upward.
Presented at the property firms annual Central London Office Market Breakfast, held at the Dorchester on LondonΓÇÖs Park Lane, the rising rental prices of LondonΓÇÖs grade ΓÇÿAΓÇÖ office space are predicted to be boosted by growing demand from lease breaks, expiries and the expansion of businesses in the Financial sector.
In a press release following the event Tim Robinson, who is the Leasing Partner at Knight Frank gave his view on the activity and its more immediate impact:
ΓÇ£This cycle is being driven by a lack of supply, and over the next two years, as business expansion appears on the agenda, it is a certainty that the availability of new space will be inadequate to satisfy demand. We expect all core markets to achieve new record headline rental levels.ΓÇ¥
The firm also believes that supply will be diminished further by growing levels of inward investment from Asia-Pacific, as Investment Partner Stephen Clifton explained:
ΓÇ£Central London is the gold bullion of world property markets with strong rental growth driving investment performance.ΓÇ¥
But with the possibility of tenants being displaced from core areas as competition for prime office space heats-up within the Capital, could it be secondary and recently refurbished office buildings that could benefit most from this expected ΓÇ£crunchΓÇ¥ in office supply?
The increased prices in the commercial office market of Central London has also been reflected in the Serviced Office Space Sector, which consists of over 200 locations in the heart of the capital and includes some of Central LondonΓÇÖs most iconic buildings and prestigious business addresses.
During 2010, research from officebroker.com (click here to view research) into this sector of the office market has shown prices to have increased by 10%, rising from an average of ┬ú466.00 per workstation in 2009 to ┬ú513.00 in 2010.
Within this same period, the number of new businesses entering serviced offices across Central London has also grown by 15%.
Given the pattern of diminishing supply and rising prices predicted by Knight Frank in the commercial office market, it would appear that the serviced office space market has been mirroring this activity ΓÇô suggesting that prices in both office markets could be set to rise in 2011.