Companies hoping to fork out less than £40 per square feet for offices in central London may be disappointed, after new research shows there are only three areas left offering space at those prices.
The Docklands, Stratford and east City fringe are the only three sub-markets in the capital offer Grade A office space at £40 per sq ft or below, estate agents Carter Jonas said, as rents in the capital continue to soar.
That compares with a year ago, when the City, South Bank and Midtown – the area that encompasses Bloomsbury, Holborn and St Giles – still offered space at £40 per sq ft or below.
Carter Jonas said the lowest starting rent stood at £55 per square feet for both the City and the Southbank, and £57.50 in Midtown currently.
Rents in London have reached record levels this year, driven by economic recovery and companies searching for offices to house their expanding workforces at a time when space is in short supply.
In August, the Shard skyscrapers scored the highest rent for an office building outside of the West End, after German-listed IT company Leonteq Securities snapped up the 26th floor for over £90 per square feet.
The highest rent achieved so far in the City was for the penultimate floor of British Land and Oxford Properties’ Leadenhall Building – also known as the Cheesegrater – also for £90 per sq ft to Affinity Shipping.
That is still a fraction of the West End, where Green Property secured a record rent of £185 per sq ft at 8 St James’s Square.
Michael Pain, head of Carter Jonas’ tenant advisory team, said: “The combination of office to residential conversions and the hiatus in property development activity in the years immediately following the banking and sovereign debt crises, has resulted in historically low vacancy levels throughout all parts of Central London which is putting upward pressure on rents as demand for office space increases.”
Carter Jones predicts that average central London office rents will rise by 19 per cent over the next two years until the wave of office developments that are currently under construction hit the market and ease pressure on demand.
By the fourth quarter of 2017, average rents for new, prime City and West End office space is expected to reach £80 per sq ft and £155 per sq ft respectively, compared with £60 and £127.50 in the fourth quarter of this year.
Rents in Midtown and South Bank are expected to increase from £75 to £95 sq ft and £62.50 to £72.50 per sq ft over the same period.