London office rents set to boom in 2010

COMMERCIAL property surveyors expect rents for London offices to shoot up in the second quarter of 2010 as space in the capital continues to decline.

Commercial property rents will rise at the fastest rate in two years, surveyors predicted yesterday in a Royal Institution of Chartered Surveyors (RICS) report, confirming signs that the property market is starting to recover.

But outside of London demand for office space remains poor and as a result rents are expected to stay low. Surveyors said anticipated public sector employment cuts expected to follow the general election were to blame for the lack of activity.

“Commercial property lettings activity continued to pick up across office and industrial property for the second consecutive quarter, although investment demand has moderated somewhat outside the London metropolitan area,” RICS, the body which regulates property professionals, added.

The body also said that industrial rents were also starting to pick-up in London and the South.

Oliver Gilmartin, RICS senior economist said: “There are some signs that a lower pound and a gradual rebalancing of the UK economy towards greater export activity is starting to feed through into industrial lettings activity.”

London rents shot up 12 per cent in the first three months of 2010 from £42.50 per square foot to £47.50. But rents are still way below their peak of £69.50 per square foot in the third quarter of 2007.

A total of 1.2m square feet of space was let in the City of London in the first quarter of the year – six times more than in 2009.

But the recovery in commercial rents could be halted if the banks release their distressed assets onto the market this year, property analysts said.