The commercial market in the City is on the up and up, with office rents rising 3.5 per cent so far this year compared to last year, according to property group Savills.
The average Grade A rent in the Square Mile now stands at £62.11 per square foot (sq ft), compared to £60 last year, Savills said.
Total City take-up for the year to date has now reached 1.8 million sq ft, 10 per cent down on the same point in 2017, but 10 per cent up on the 10 year average.
Read more: Central London office take-up is on the rise
Total City supply stood at 7.4 million sq ft at the end of April, equating to a vacancy rate of 5.8 per cent, the lettings group said.
Demand this year has been led by the insurance and financial services sector, according to Savills, followed by professional services and the tech and media sector.
Philip Pearce, head of Savills central London office team, said the rent increase was “a positive sign for the market” although he admitted that, in the months to come, rents may become less skewed by what he called a "handful of outlying deals".
Gerald Kaye, CEO of property group Helical, which has recently turned its full attention on the London office market, was also cheered by the prospect of rents increasing.
“It aligns with what we’ve been seeing and supports our assertion that occupiers are prepared to pay a premium for the best buildings, in the right locations,” said Kaye. “Nearly two years on from the EU referendum the City remains a major draw for an increasingly diverse range of commercial occupiers.”
Meanwhile, according to M3 Consulting’s spring London Development Barometer, which surveys the capital’s development industry, 45 per cent of respondents believe that market demand for offices will increase in the next five years.
Chris Vydra, head of City leasing at CBRE, is also optimistic: “For the City, we are of the view that the market is in near perfect balance, with 5.7m sq ft taken up in the 12 months to the end of April, and 5.7m sq ft currently available.”
Looking forward, the City’s commercial letters remain optimistic:
“We are cautiously positive,” said Helical’s Kaye. “Demand is being driven by the tech and creative sectors and a migration from west to east, leading us to have conversations with brands and occupiers we would never have imagined even five years ago.”