London Office Rents to Soar Most Since 2000 on Vacancies

by Patrick Gower

City of London financial district office vacancies are set to reach a 15-year low of 4.8% in 2015, pushing up average rents by 16 percent this year and 12 percent next year, according to the statement. Photographer: Simon Dawson/Bloomberg

(Bloomberg) -- Central London office rents will climb the most since 2000 this year as tenants compete for a dwindling amount of space, according to BNP Paribas SA’s real estate unit.
Average rents will jump 17 percent to 655 pounds ($998) a square meter from 560 pounds at the end of 2014, the broker said Tuesday in a statement. Vacancies in the West End district will drop to 3.5 percent, the lowest ever recorded, BNP Paribas Real Estate said.
Competition for the best office space in London is intensifying after development stalled during the financial crisis. That’s attracting investors as total return, a combination of rental income and changes in value, will probably reach 17 percent this year, the broker said.

“The London office market continues to go from strength to strength,” Steven Skinner, head of West End investment at BNP Paribas Real Estate, said in the statement. “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.”
Office vacancies in the City of London financial district are set to reach a 15-year low of 4.8 percent in 2015, pushing up average rents by 16 percent this year and 12 percent in 2016, according to the statement. Midtown vacancies may reach 4.3 percent this year, generating rental growth of 15 percent this year and 10 percent next year.
Average London office prices are seen increasing 14 percent in 2015, with Midtown reaching 15 percent. In the West End, which vies with Hong Kong for the world’s most expensive offices, rents are expected to climb 18 percent. That would produce a total return of 17 percent, BNP Paribas Real Estate said.