City rents up for first time since 2007

CITY office rents rose for the first time in three years at the end of 2009, boosting confidence that office rents have bottomed out.

A report from Cushman & Wakefield reveals 41 per cent of the year’s total take-up of office space took place in the last quarter of 2009.

The take-up of 2.6m sq ft across the capital is the highest quarterly figure since the collapse of Lehman Brothers in 2007. The Square Mile saw its first rental growth in three years, with prime rents rising 3.5 per cent to £44 per sq ft, up from £42.50 per sq ft.

London office rents hit their lowest point in the last quarter of the year, with prices on prime space standing at £75 per sq ft in the West End.

Speculative development activity, however, has fallen markedly and at the end of December there was just 5m sq ft under construction in the capital. This is down by 42 per cent compared with 12 months ago.

BlackRock announced it will snap up one of the few new buildings in the City. It will occupy occupy Canary Wharf Group and Exemplar Properties’ 270,000 square foot office tower at Drapers
Gardens. It will pay about £50 a sq ft on a 25-year lease.

Other key deals that happened towards the end of the year included law firms Clyde & Co taking 145,000 sq ft at St Botolphs, and Pinsent Masons taking 189,000 sq ft at Crown Place.

Central London has an overall vacancy rate of 8.5 per cent. In the last recession, the peak vacancy rate was nearly 17 per cent.

C&W City office manager James Young said: “We turned the corner in the third quarter and in the fourth quarter we have seen a number of major transactions that have boosted the annual take-up.

“Companies who have been biding their time on buying new space will see Blackrock’s new deal and realise there is a narrowing window. The great deals we are seeing won’t be here forever.”