Office rents in Central London seem to have slipped into a slight decline and according to the newly-published London Office Market Bulletin Autumn 2017 from property consultants Cluttons, one of the primary causes is the uncertainty that still lingers regarding what the ultimate outcome of the Brexit negotiations will be; which is in turn causing some trepidation amongst business owners.

The report does take time to highlight the fact that headline office rents have remained stable across many locations in Central London for the larger part of two years, but attributes this to rent free periods which have been used to sustain rates. However the report states that this has now reached tipping-point and as a result landlords are being forced to consider alternative incentives in order to attract occupiers, including delayed completions.

Freddie Pritchard-Smith, Head of commercial office agency at Cluttons, commented, “Many firms remain nervous about making a long-term commitment to more space, choosing either flexible overflow space or to reconfigure within their existing office. The exception to this of course remains the serviced office and TMT sectors, [which] have helped transactional levels in the West End to surpass 4 million sq ft already this year, which is paradoxical to the falling rental conditions.”

So while some sectors appear to remain largely unaffected there is an apparent decline among others, which is beginning to hurt the market as a whole. Occupiers may relish the opportunity to take advantage of lower rates and increased incentives, but for property developers the shift may not be so welcome.

Pritchard-Smith continued, “For developers, the challenge is more acute, especially where space is being developed speculatively. While pre-lets are arguably the strongest section of the market, occupier expectations and demands continue to evolve, putting greater pressure on the specification, amenities and design of new buildings to attract them to their scheme, which inevitably will have cost implications.”

Cluttons’ head of research, Faisal Durrani, added, “It is a well-documented fact that net effective rents have been declining ever since the Brexit referendum last summer, but we’re now at a critical point in the market, where a combination of subdued demand and lease incentives at extraordinary levels mean that headline rents have started to give way and slip as we enter Q4.”

Sam Bonson

Sam is an aspiring novelist with a passion for fantasy and crime thrillers. He is currently working as a content writer, journalist & editor as he continues to expand his horizons.
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