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News Release


Central London Commercial Property – Prime Office Rents set to rise up to 9% in 2010

According to new London offices research from Jones Lang LaSalle

London, 12th January 2011 – During 2010 the Central London commercial property market surpassed performance expectations, with rents for London offices increasing by nearly 18 percent in the West End to £88.50 per sq ft and over 20 percent (22.2 percent)  in the City to £55.00 per sq ft, according to new research from Jones Lang LaSalle.
Jones Lang LaSalle expects both markets to continue to perform robustly in 2011; rental growth will be driven by a lack of grade A space with the West End to reach around £95 per sq ft in larger units, and in excess of £100 per sq ft in smaller deals. In the City rents could surpass £60.00 per sq ft this year with pre-recession rents of circa £66 per square ft forecast to be exceeded before the end of 2013.

Jonathan Evans, Head of West End Agency and Development at Jones Lang LaSalle, said: “2010 ended very encouragingly for London offices.  Although many long standing requirements have now been fulfilled we expect continued activity from the service industries in the West End, primarily advertising, PR and publishing. We are also seeing early signs of demand from small to medium financial service occupiers. Occupiers will be chasing limited supply; grade A office supply fell 32% across London in 2010 – the most rapid reduction since 2000 – and this will continue to support growth.”

Although active demand fell over the year, actual deals done in the West End reached 3.7 million sq ft, a 70 percent increase on 2009 and 16 percent ahead of the 10-year average, demonstrating the return of confidence to the leasing market last year. Activity in the West End increased 26 percent in the fourth quarter of 2010 with nearly one million sq ft let, 10 percent up on the same period in 2009.
Commenting on the office market in the City of London Dan Burn, Head of City Agency at Jones Lang LaSalle, said: “Take-up in the City during 2010 was significantly stronger than expected considering the negative sentiment at the start of the year. Office rental growth has reached healthy levels and we will continue to see rises during the course of 2011 as supply constraints drive us back towards the peak rental levels reached in 2007. However, despite  a number of funding and Joint Ventures being agreed  for  a number of major schemes , the anticipated supply response from new  speculative starts did not materialise in 2010 - and due to this, the delivery of new schemes will be delayed post 2013 - 2014. This will encourage further rental growth as there will be limited choice of good Grade A new product for the next two years at least.”
Total office space let in the City during 2010 was 6.1 million sq ft, a 37 percent increase year-on-year and 20 percent up on the 10-year average. Take-up in 2010 was driven by larger deals with a 70 percent increase in deals involving units over 50,000 sq ft.  With supply falling 24 percent over 2010, there was also an increase in pre-letting activity as tenants sought to secure the best space pre-construction.
Other highlights for the London commercial property market include:

• In 2010 investment in offices in London’s West End reached £5 billion, a 77 percent increase on 2009 levels, with £1.4 billion traded in Q4. Volumes were dominated by foreign investment which accounted for 63 percent of all acquisitions (£3.1 billion) of the total. Prime yields for lot sizes under £10 million remained strong, starting the year at 4.75 percent and ending the year at four percent, the sharpest annual yield compression since 2005.

• Office investment in the City of London totalled £1.7 billion in Q4 2010, a 149 percent increase over the same period in 2009, with annual volumes reaching £5 billion, a 24 percent increase year-on-year. Volumes were driven by overseas purchasers accounting for 70 percent of all sales (£3.3 billion). Prime yields for lot sizes under £40 million remained stable at 5.25 percent with larger lots at 5.25 - 5.50 percent.
• In Docklands take-up increased by over 300% over 2010, which can be attributed to robust take-up in Q4 with deals to JP Morgan Chase, MF Global and HSBS driving levels to 1.3 million sq ft, the highest quarterly total since December 2008. Prime rents remained stable at £37.50 per sq ft with overall vacancy rates falling from 8.1percent to 7.4 percent.