by Alex Catalano
Commercial rents in Britain are streaking up towards levels unseen since the mid-1970s property boom, according to the latest Investors Chronicle/Hillier Parker Rent Index. And City offices are leading the pack, with rent rises of 55% in the fringe and 42% in the core over the last year.
The overall increase was 13.7%, or 9.5% over the rate of inflation: this is the highest rental growth, in real terms, for 14 years. Moreover, during the last four years the rate of growth has been speeding up.
In the City, office rents in the 12 months to May rose as much as over the previous four years. “Supply in the City is at an all-time low and, fuelled by a strong demand, top rents in the central core have risen from £45 to over £55 per sq ft during 1987,” says David Price, Hillier Parker’s City office partner. “The market badly needs a greater supply to provide a better balance and stability, but our research shows that this balance is unlikely to be achieved for the next three or four years.”
However, Hillier Parker’s figures show a marked contrast between the performance of central London offices and those elsewhere. In the capital’s suburbs, the South East, the Midlands and the North rental growth lagged at between 1.5% and 3.6%; only Scotland almost reached double figures with 9.9%.
London shops also outperformed their provincial counterparts, with an average rental rise of 23.8% in the centre and 26% in the suburbs. Retail in the buoyant South East came second, with 18% growth, and the rest of the country clocked up rises of between 12% and 13%.
Industrial rents, whose growth has been snail-like by comparison, continue to show signs of improving. Over the last year, they have increased 4.4% on average, but in the last six months have risen by 7.9%.
According to Hillier Parker, although the biggest increases have been in London, the most interesting change is the definite signs of rising rents in the North.
