London office rents suffer as demand wanes

OFFICE rents in London and other European capitals rose at a slower rate and demand fell in the last three months, prompting experts to warn that public spending cuts could stunt a recovery in deals.

Demand for office space in London, Moscow and Stockholm drove a modest 0.7 per cent rise in prime rents between the start of July and the end of September, according to the office rental index in Jones Lang Lasalle’s third quarter European Office Clock.

That compared with 2.6 per cent in the second quarter, 1.2 per cent in the first quarter and -0.8 per cent in the third quarter last year. Demand for space dipped slightly in the period, although it was 36 per cent higher than a year ago, the study of 24 markets showed.

Moscow led the rise in rents with a 6.3 per cent lift, followed by Stockholm with 5.4 per cent and London on 2.9 per cent. Rents were unchanged elsewhere, although rents in the Spanish capital Madrid fell 2.7 per cent and in Barcelona by 2.5 per cent.

Jones Lang Lasalle said occupiers were committing to deals more as economic growth returned, but consolidation and churn was driving activity. Discounting and a space shortage is supporting demand in many markets.