The supply of Grade-A space in the Western Corridor has fallen to its lowest level since 2008, according to the latest report from Jones Lang LaSalle.
The shortage has fuelled prime rental growth, said JLL, particularly within West London. Further growth is forecast in town centre locations where demand has been focused.
The lack of supply has led to a vacancy rate of just 5.9%.
James Finnis, head of South East office agency, said: “Over the next 12 to 24 months, the refurbishment window of opportunity to convert Grade B space to Grade A is open as take-up reduces the supply of this best space. We are forecasting a pinch point in 2012 where, assuming current levels of demand, rents will increase markedly for the best space in areas of limited supply.”
Investment activity picked up over the first half of 2011 with £805m traded. Volumes were in line with five-year average levels, boosted by Blackstone’s sale of Chiswick Park for £480m.
Mark Wilson, JLL’s director national office investment, said: “With the yield gap between central London and the rest of the UK expected to remain favourable, we expect further activity from overseas investors in the Western Corridor over the next 12 months.”
Prime yields stabilised at 6.50% in both the Thames Valley and West London.
joanna.bourke@estatesgazette.com
