The company recently reflected on its latest financial figures and noted that while growth in property prices has slowed, demand for high-quality office space to rent in London remains strong.
Economic uncertainty across Europe has seen lending activity weaken, which in turn has meant less speculative development and greater demand for prime office space to rent in London’s financial districts, experts explain.
Chris Grigg, British Land’s chief executive, said: “Valuations have risen more slowly in this quarter, reflecting in part a more uncertain economic outlook.”
“Valuations won’t grow as quickly. But in terms of rental growth, we’re quite optimistic. It’s a function of ‘not much supply’,” he is quoted as saying in the Guardian.
British Land is among the largest commercial property investors in the UK and its London office space leasing activity in recent months has helped to boost its overall occupancy rates to 97.8 per cent.
Earlier this month, the company revealed its plans to develop 700,000 sq ft of office space and trading floor on the Broadgate Estate in central London.
Editor’s notes: Following the pandemic, there has been an increase in demand in most UK cities for high-quality office space with amenities that improve employees’ well-being such as gyms, restaurants and wellness rooms, as well as for spaces that have good ESG credentials with accreditations from the likes of BREEAM and LEED.
Offices that meet these requirements tend to be new and be built to a high specification and attract prime office rents.
However, in the majority of markets, ongoing and new office building developments slowed down during the pandemic, and following the pandemic construction costs increased and the supply of materials became inconsistent due to geopolitical and economic events.
The increased demand for prime office space together with decreased supply has put upwards pressure on prime rental rates.
The ‘Big 6’ regional office markets are Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.
In 2022, prime office rent in Birmingham reached £41 per square foot per year. In Bristol city centre in the same year, headline rent reached £42.50 per square foot. The best quality office space in Edinburgh reached £39.50 per square foot. Glasgow office space of the highest quality was quoted at £35.50 per square foot. Prime office space in Leeds reached £36.00 per square foot and the best office space in Manchester reached £38.50 per square foot.
Prime rents reached £130.00 per square foot in London’s West End. Prime office rental rates in the City of London reached £72.50 per square foot and prime rents in East London reached £55.00 per square foot.
For space of the very best quality at the greatest demand, rents higher than the above quoted prime rents were achieved in all markets.