Cluttons has just released its latest London Office Market Outlook report, detailing the performance of the occupier and investment markets, including opinions on how the market is likely to perform during 2018.
During the final quarter of 2017, 10 of the 18 Central London office submarkets the firm monitors registered rent falls, with momentum building on the corrections that began during Q3 last year. With additional incentives such as contributions to fit-out costs and even delayed completions becoming commonplace in many locations, net effective rents continued declining in the last quarter of 2017. This translates into 18 months of faltering net effective rents, since the Brexit referendum the firm states, despite the vacancy rate being relatively low at 5.7%.
In order to entice demand, some landlords have begun offering ‘psychological’ rent reductions of as little as £2.50 sq ft, however the average reductions in some areas of the city where much larger.
Canary Wharf saw the biggest drop in rents in Q4 - down by 10.5% to £42.50 sq ft. Cluttons now claims that Canary Wharf has become a ‘bargain location’ where occupiers are almost certain of securing a good deal. The firm reports: ‘For example, some space is available for as little as £37.50 sq ft, accompanied by a 30-month rent free period on a 10-year lease; something that is unmatched in many other Central London locations.’