Despite the take-up of London offices falling by 27 per cent in 2011, investors in the sector still have reason to be upbeat about the market's future prospects. Knight Frank highlighted the significant demand for space in such properties generated by the technology sector, noting that companies operating in the IT and telecoms industries leased 1.3 million sq ft of space in 2011, a substantial increase from the 640,000 sq ft taken a year earlier. James Roberts, head of commercial research at the firm, commented: "If office demand from tech firms doubles during an economic slowdown, it will be interesting to see what happens when growth improves."
Leasing partner at Knight Frank Tim Robinson noted supply of high-quality London office developments is likely to fall during 2012 and 2013, which will mean demand will continue to outpace the amount of available space on the market. As a result, investors need not be overly concerned about the rental prospects for such commercial real estate assets. "I expect rents to be level for most of 2012, possibly growing in Q4, but certainly increasing next year," Mr Robinson asserted.
A report published last month by BNP Paribas Real Estate came to a similar conclusion, highlighting the probability of a "modest rental uplift" in the West End, which may mean it is a lucrative location for a commercial property investment. The organisation pointed to the high level of demand from the technology, media and telecommunications sector, noting that such firms accounted for 30 per cent of the office space let in the West End in the final three months of 2011. Although the supply of offices climbed by three per cent quarter-on-quarter, there was still 29 per cent less stock available in between October and December last year, compared to the same period in 2010.
- Friday 03 February 2012