Office space availability in central London this year may not produce yields of 2010 levels.
Research carried out on London office space suggests the capital’s good showing in relation to renting and leasing offices in 2010 may not be as easily achieved in 2011.
Central London’s commercial property market in 2010 has shown strong signs of recovery despite a poor end to the calendar year in the capital.
Rental rates also rose throughout the year and companies were interested in Grade A office space, with more demand than supply, according to consultancy firm Capita Symonds.
London experienced a strong growth in rental rates, which saw a rise of 14% during 2010 with the City perhaps unsurprisingly taking the most in rents. The City saw its rent values increase by 25%, meaning that the average square foot cost £53 in 2010, compared to £42.50 in in 2009.
In the Docklands area office space saw costs rise by 33% per square foot of office space, which in fiscal terms equates to a £10 rise from £30 per square foot in December 2009 to £40 per square foot in 2010.
The main instigators in the rise of property prices over the past year have come from foreign investors. The overseas firm have started the office market recovery in London and although investment dropped significantly in the last quarter of the year, prime rents of stable or rising.
Office vacancy rates have declined to 8% in 2010 from 9.1% in 2009 with the largest decreases coming in office space in the centre of London.
Looking ahead to this year Capita Symonds believe that the year could continue as 2010 ended. The lack of available Grade A office space due to a lack of new buildings appearing, combined with sluggishness in the market suggests that there will be less big deals occurring than in 2010.