Rental growth for the City office market will slow to 6.5% next year, almost half the 12.1% expected in 2015.
According to Cluttons, unsustainable rental increases and a large pipeline of developments and refurbishments will reduce the current pressure on rents.
It said almost 12m sq ft is under construction across central London.
In the City, 5.5m sq ft is being built, 44% of which is already prelet. A further 3m sq ft is in the pipeline to soak up demand.
“We are on the cusp of moving from a supply-demand imbalance to a potential supply glut,” said Faisal Durani, head of research at Cluttons. “This is going to dampen rental value growth rates in the City, where some 7m sq ft of space is currently available, that translates as more than 50% of what is currently on the market in prime central London. This gives a sense of the scale of the growing supply bubble.”
Cluttons said the fall in rental growth would hit the City and City fringe. In the West End market it expects rental growth to be tempered by the 600,000 sq ft of speculative development coming online in Vauxhall/Nine Elms by 2020.
