The organisation is convinced that the situation within the market at present is such that rental rates on offices in London’s most sought-after areas will soar, essentially because demand will far out-strip supply.
An imbalance brought about by a relative lack of new developments across the city and a wide variety of businesses looking to increase or improve their office space is expected to leave renters paying more and more as long as the situation persists.
Indeed, Knight Frank is currently estimating that prime rents in the City of London will increase by as much as 9.1 per cent over the course of 2011, with occupiers paying £60 per sq ft before the end of the year.
The situation in London’s West End could be even more dramatic, with average office rents tipped to top £100 per sq ft at some point this year.
Offering his take on the subject, Tim Robinson, office leasing partner at Knight Frank, said: “This cycle is being driven by a lack of supply and over the next two years, as business expansion appears on the agenda, it is a certainty that the availability of new space will be inadequate to satisfy demand.
Head of London research for the firm, James Roberts added: “London, with its long-standing ties with locations like Hong Kong and Singapore, is well positioned to become the East’s beachhead for branching into Europe.”
Earlier this week, the communications company committed several hundred million pounds to help prime minister David Cameron achieve his aim of turning areas of the East End of London into a Tech City, with some of the top businesses in the sector working out of newly built office space.
Editor’s notes: In 2022, prime office rents were at £72.50 per square foot per year, and prime office rents in the West End were £130 per square foot.
Office leasing activity across the whole of central London slowed down in the last quarter of 2022 and this pattern continued into the first quarter of 2023 due to global economic uncertainties caused by issues with various financial institutions across the globe, high interest rates, the Russo-Ukrainian conflict, supply chain issues and the mass layoffs in the tech and other sectors that commenced in the Summer of 2022.
The total amount of office space in Central London, as of Q1 2023, stood at 21.4 million square feet.
In Q1 2023, there was 10.5 million square feet of new office space in the development pipeline and there was 8.6 million square feet of active demand in the Central London office market.
In the fourth quarter of 2024, it was reported that prime London office space availability had plummeted to near-record lows.
Vacancy rates for best in class office space stood at 0.3 per cent in core West End market of St James’s and Mayfair, and 0.5 per cent in the City of London.