Office rents across central London levelled off in the final quarter of last year, ending a period of post-lockdown growth amid uncertainty and fresh restrictions caused by the Omicron variant of Covid-19.
Research by Carter Jonas shows that grade-A office net effective rents – income with incentives priced in – were stable across the central London submarkets in the final period of 2021.
That compares with net effective rents having increased over the third quarter by 2.4% for a 10-year lease, and 3% for a five-year lease.
Typical rent-free incentives remained low across the West End, Midtown and South Bank submarkets, where available stock remains scarce – meaning tenants are forced to compete for favourable office space.
Meanwhile, the City of London and Docklands markets still have more grade-A space available, making conditions more favourable for tenants. As a result, the submarkets saw less movement in typical rent-free incentives last year.
Docklands has the most ground to make up to return to pre-pandemic levels, with prime net effective rents still 7.7% below their pre-Covid levels (assuming a five-year lease). The City of London is 5.6% below, while Midtown and the West End are closer to pre-Covid levels at 3.8% and 3.0% below respectively.
Carter Jonas partner Michael Pain said: “Demand was certainly undermined when the Omicron variant manifested itself. It certainly weakened confidence in the market. But we are now seeing, certainly since the beginning of February, a pick-up in demand.
“Omicron has delayed the recovery by a couple of months. So it’s a temporary setback to the market, and the market is already beginning to recover from it.”
To send feedback, e-mail alex.daniel@eg.co.uk or tweet @alexmdaniel or @EGPropertyNews
