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Rental growth and the economy

13th February 2015

Rental growth and the economy

As time goes on and the market tightens further, the landlords who have seen greatest rental growth in their office stock seem to have dollar signs in their eyes. Greedy landlords are more prevalent on the fringes of the central London office market due to these areas seeing the highest increase in rental growth. Ollie Salter a surveyor at Morgan Pryce explains that a deal he was working on in Chiswick fell through, however he found himself negotiating on same building 3 months later – only the quoted rent had increased by £5 psf. Similarly rents of £70 psf are being quoted in Clerkenwell and Shoreditch has seen rental growth of 8.6% (compared to the West End who saw a 7% increase) with rents of £57 psf being achieved; the story is much the same in SE1.

Total available stock in London fell by 20% last year to just 12.9 million sqft and take up rose by 16% 2.9 million sqft higher than the 10 year average. Looking at these figures it perhaps isn’t surprising rental figures are through the roof. Healthier economic, population and employment growth are all factors helping to increase demand in the office market; construction is now rising and we will begin to see new office stock in the market within 18 months – until then available office space will remain low. 

Now we are out of the dark days of the ‘Great Recession’ and GDP is about 3%, higher than peak 2008, surely this means we should be able to cope with these high rents? However we are still feeling the squeeze because GDP per capita is approximately – 2 % and our wages have only just increased above interest rates; with wage growth now above inflation, and CPI at 0.5% we should begin to feel a little wealthier and rents a little easier to pay.

This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.


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