Tenants facing competition

A recent report by Jones Lang LaSalle highlights a small letting in Mayfair has just achieved £115 per sq ft.

JLL is predicting that City rents will hit £65 this year. Fellow property consultant Gerald Eve has revealed that large floor plates, exceeding 20,000 sq ft, are in particularly short supply. The current London office development pipeline suggests that no more than four of these will become available between 2015 and 2017.

At Canary Wharf, demand has not reached the peaks of the City or West End, but nonetheless DTZ says vacant space has halved to 860,000 sq ft over 15 months. In the first 8 months of 2014 over 150 office deals for grade A space in central London were completed. Some 4m sq ft has been taken off the availability lists according to Metropolis research.

In their increasingly desperate search for decent space at an affordable price, tenants are looking outside core office areas.

Amazon has chosen space on Holborn Viaduct. Google has gone to King’s Cross and Principal Place in Shoreditch. The Financial Conduct Authority has decided to go to Stratford.

Non-core area rents are hitting £50 per sq ft and previously unfashionable areas such as Southbank and North of Oxford Street are vacuuming up deals

Alan Carter, real estate researcher at Oriel Securities, said he had never seen an office letting market quite as buoyant.

Tenants are facing blows to the bottom line as rents continue to escalate.

Which helps explain why some investment bankers and law firms are scouring Birmingham and Manchester for a property deal that they can actually afford.

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