Record uptake of London office space continues…but at a price

office spaceTake up of leased office space in London has hit its highest level since 2000, claims a new report from BNP Paribas Real Estate. The recorded level of 4.49 million sq. ft. during the final quarter of 2014 was driven by serviced office operators and occupiers in the technology, media and telecoms sectors. TMT firms accounted for just under a third (31 percent) of the market in Q4 and 24 percent for the whole year. However the market is still characterised by a mismatch of supply and demand which means not only low vacancy rates in key business districts but also sustained upward pressure on rents.  The average office rent per square metre in the City of London has risen by 17 per cent from £560 to £655. In the prime parts of the West End rents have jumped 8 percent over the year to £1092 per square metre.

The report also notes the continued attractiveness of London commercial property investments for overseas buyers which is not only affecting the real estate market in the capital, but is also having a knock on effect for other regional markets across the UK as occupiers and investors alike look for alternatives to keep costs down and maximise their investments.

Steven Skinner, head of West End investment at BNP Paribas Real Estate, said: “The London office market continues to go from strength to strength. The combination of volatility in other asset classes and historically low yields in sovereign-bond markets should ensure that capital continues to flow into the London market.”