London’s skyscrapers are reaching for the sky in more ways than one, after it turned out the capital’s high rises have the highest rental growth in the world.
Skyrocketing demand for office space in the UK capital is pushing commercial rents up, up, up: estate agent Knight Frank found in its Global Cities Report that tower rents grew 10 per cent in the last six months alone.
That said, Hong Kong towers are still be the world’s most expensive places to rent an office. With prime rents at $255 per square foot it’s more than double London’s.
But at the rate it’s going, London is catching up fast: 10 per cent growth means rents are growing five times faster than both New York and Hong Kong, and three times faster than Tokyo.
A letting in the Shard recently smashed price records for the South Bank and the City, renting out its entire 26th floor at over £90 per square foot, just beating the Leadenhall building’s previous record of £90 per square foot.
James Roberts, head of commercial research at Knight Frank, put this trend down to an increasing appetite for "exclusive space”:
When construction started on the latest wave of London towers a few years ago, it was to the backdrop of the euro crisis, and some commentators said the developers had got their timing wrong. However, the doubters have been proved wrong, with skyscraper rents in London at a record high.
It’s not just in high rises that London rents are being pushed sky high. With vacancy rates at a 14-year-low, commercial rent has gone crashing through the roof across the capital, up by 35 per cent since 2007 in Noho and 26 per cent in Shoreditch.
This growth shows no signs of abating anytime soon, according to Philip Hobley, head of West End leasing at Knight Frank:
Taking into consideration the constrained development pipeline for central London, the Crossrail stations with over-site development and their surrounding schemes, as well as the continued demand from occupiers to house their increased headcount, we expect the area’s positive performance to continue.