West End office rents are expected to climb to £120 per sq ft in the next two years, with residential developers and retailers keen to snap up prime space.
City rents are also likely to rise to £70 per sq ft by 2014, Savills and broker Oriel Securities have forecast.
The duo said values in the residential and retail market will contribute to long-term upward pressure on the central London office market.
Around 3m sq ft of offices in the city of Westminster were converted to housing between 2001 and 2009.
In the retail sector, Savills recorded premiums of up to £15m and said that some prime-pitch rents in zone A have reached £700-£1,000 per sq ft.
In the City, which has low vacancy levels, rents are expected to hold up in undersupplied stock, such as prime properties and smaller 25,000 sq ft buildings.
Mat Oakley, director of research at Savills, said: “The year 2012 will push London into the global limelight with the Olympics as the core event. It will test the capital’s infrastructure and supporting retail climate as well as highlight its economic stability. The city’s overall performance will no doubt influence current and future investors as they consider the wider market dynamics that affect the city’s business sector.”
joanna.bourke@estatesgazette.com
