According to Cushman & Wakefield, consulting company in a real estate industry, rents in prime locations in London's West End will by 2012 rise by 40 percent.
According to Cushman & Wakefield, consulting company in a real estate industry, rents in prime locations in London's West End will by 2012 rise by 40 percent, which is a return to over £1,076 / sqm / year. In addition, due to lack of supply, the share of agreements signed before the end of the investment also called pre-let lease agreements, will increase.
Despite the worst demand since 1991, in the last quarter of 2009 an increase was observed on the West End, reaching the level of 68,740 sqm which is the highest level since the second quarter of 2008.
Tenants are beginning to show an interest again afraid that in 2010 the landlords will be less willing to make concessions in the negotiations - said Guy Taylor, Head of Cushman & Wakefield in the West End.
Active demand in a quarterly perspective increased as well and during this year there has been an increase of 40 percent on West End. Demand will be generated by different types of tenants seeking to secure the surface in this area, mainly those of the TMT sector (technology, media and telecommunications), finance, trade and services (see Table 1). Among the subject reporting active demand one can find: Bain & Co (3.700-5.500 sqm), Invensys (1,500 sqm) and Mirabaud (2,300 sqm).
Pressure on rents will initially result from the lack of supply of new space in the West End. Currently under construction there is just over 92,900 square meters of space, which will be completed in 2010. In 2011, only two buildings larger than 1,800 square meters will be completed(7-5 Baker Street, W1and UK & European Investments Ltd, 1 Kingsway, WC2), and in 2012 - only one (Crown Estate's, The Quadrant, Regent Street, W1).
Guy Taylor added: Due to a shortage of new space in 2011, the activity on the pre-let transactions market will revive, because the imbalance between supply and demand will increase. Many tenants will be forced to enter into these transactions.
This will lead to an increase in activity on the rental market in 2010, which will accelerate during the year in response to the economic recovery.
In the last quarter of 2009, the highest rents remained stable at £806.5 / sqm / year, but effective rents increased by 5 percent. It was the first increase since the end of 2007. In connection with the offering incitements the increase in rents is only a matter of time.
Table 1.
ACTIVE DEMAND OF TENANTS IN THE WEST END
|
|
WEST END
|
|
DEMAND
|
Third quarter 2009
|
|
Fourth quarter 2009
|
|
|
SECTOR
|
thousand sq m
|
%
|
thousand sq m
|
%
|
|
Finance and Banking
|
43.29
|
12.
|
76.55
|
17.
|
|
Public and Government Sector
|
60.20
|
17.
|
68.28
|
15.
|
|
Services
|
63.54
|
18.
|
64.57
|
14.
|
|
TMT
|
93.18
|
27
|
102.56
|
23.
|
|
Commerce and Entertainment
|
58.25
|
17.
|
76.46
|
17.
|
|
Industry
|
7.71
|
2.
|
30.29
|
7.
|
|
Other
|
23.32
|
7.
|
34.37
|
8.
|
|
Active
|
349.30
|
59.
|
452.98
|
75.
|
