Rental Growth forecast in Booming London Office Market

Posted on 6 February, 2014 by Kirsten Kennedy

Office space in Central London continues to be in high demand. As a result property agent Carter Jonas predicts widespread rental growth as the supply begins to dwindle.


Carter Jonas has forecast an average rental increase of between 5 per cent and 9 per cent by the end of 2014, with the largest increases expected to affect businesses in areas such as Mayfair, Marylebone/North Oxford Street, London Bridge and Soho. This is because the low vacancy levels associated with these areas has fuelled a boom in demand.

Furthermore, Carter Jonas warns that areas which have historically had plenty of supply for growing businesses are beginning to see office availability dwindle – and thus are seeing a correspondingly large increase in rents. The Northern City fringe, comprising of Farringdon, Clerkenwell and Shoreditch, has for example seen the highest level of rental growth when compared to all other Central London office sub-markets, with values rising between 13.3 per cent and 15.8 per cent during 2013 alone.

Head of Central London tenant representation at Carter Jonas, Michael Pain, believes that 2014 will very much pick up where 2013 left off in terms of rent rises.

He says; “Low vacancy levels continue to persist throughout much of the Central London office market which has resulted in widespread rent increases during the second half of 2013, a trend that we predict will be the hallmark of 2014.

“The increases in office rents in the northern City fringe have been catalysed by the influx of technology and creative companies in the area over the last few years.

“Historically low vacancy levels, and an increasing trend towards redeveloping office buildings for residential use, are gradually eroding the area’s advantage as a low cost location.”

Yet while certain areas of Central London may be quickly reaching capacity, Docklands has not increased rents since the first quarter of 2013 due to low demand within the area. While this may be bad news for landlords within the area at present, Mr Pain believes this situation will change in 2014.

As the numbers of office developments within the City grind to a halt, he claims, businesses will begin to look further afield to satisfy their needs – meaning rents in Docklands are likely to increase towards the end of the year.

He continues; “As the number of existing buildings in the City that can accommodate office requirements in excess of 100,000 square feet dwindles, it is likely that tenants that have insufficient time to satisfy their relocation requirements by way of a pre-let agreement on buildings that have yet to be built will, out of necessity, switch their areas of search to Docklands.

“We therefore believe that demand for Docklands’ office space will improve throughout 2014.”

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