Rental growth in the prime office markets of the M25 is set to hit 5.4% annually over the next five years as supply continues to shrink, according to Knight Frank’s latest office survey.
Top rents in the area are around £301 per sq m (28 per sq ft). However, KF’s head of research Steven Mallen noted that the level of new space is at a “critical” level, at just 8% of the total available stock of 508,000 sq m (5.5m sq ft).
Telecommunications and business services occupiers account for much of the demand, but the report warns that they could start looking elsewhere unless new schemes enter the supply pipeline. “The market is now in serious danger of losing out to other areas unless there is more supply,” Mallen said. “Occupiers have been forced into the second hand market.”
The volume of development on site has dropped sharply to just one year’s supply, compared to twice that in June last year. Schemes under construction account for only 0.2% of the total stock in the market. And over half of these schemes – the equivalent of 123,412 sq m (1.3m sq ft) – are pre-let.
“The M25 development pipeline is shrinking rapidly at the time when space is needed,” Mallen said.
EGi News 11/06/97
