London office values will start falling in the second half of the year as rents dip across the capital, Cluttons has predicted in its latest London office bulletin.
Although investment reached £11bn between January and July – up from £10.2bn in the same period last year – take-up has been heavily reliant on major deals, including WeWork taking 425,000 sq ft in Q2, while rent and capital values fall.
Capital values fell 5.8% in Vauxhall and Nine Elms in the 12-months to Q2 and 5.6% in Kensington & Chelsea. However, values were up 4.2% in King’s Cross and 3.5% in Mayfair.
Faisal Durrani, head of research at Cluttons, said: “While net effective rents are clearly falling, there are still pockets of the market where capital values are holding up, underpinned by a distinct lack of stock coupled with resilient demand.
“This has led to some buyers, especially owner occupiers, paying strong prices for vacant buildings. With rents showing signs of softening across the market as a whole, it is likely that values may soften as the year progresses.”
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