propertytalk Live! - Occupiers face fight for space amid rising rents

propertytalk Live! - Occupiers face fight for space amid rising rents

A shortage of good quality office space in London's West End is taking its toll on activity levels, leaving occupiers facing an uphill battle to secure space and the prospect of higher rents.

That is the verdict of the latest figures from property consultants Cluttons.

The vacancy rate over the quarter fell from 5.9% to 5.4%, the lowest level since January 2009.

However, in certain submarkets - for example, Soho - the stock shortage brought around a vacancy rate of 3%. Cluttons expects this pressure to intensify over the next two years, as a large number of occupiers with leases taken out in 2006/07 face breaks or expiries.

Over the last quarter, Cluttons confirms that there has been a 20% increase in West End space under construction, all of which is speculative.

While these developments will offer a temporary and partial easing of occupier demand, Cluttons anticipates that pre-lets will increase to fix costs given the prospect of higher rents over coming years. While a surge in pre-lets will enable some occupiers to move to a preferred location within the West End, others will look to edge of core locations to contain costs.

Cluttons also reports that investment volumes remain buoyant, as investors look to wealth preservation through good quality stock which provides a stable return. Prime West End yields are at 4% with Mayfair and St James's transactions closing in around this figure.