London rents still higher than Europe
LONDON remains the most expensive European city in which to rent prime office, distribution and shopping centre space according to research out today by Knight Frank.
Despite a steep fall in prime property values, London’s West End remains the most expensive location to rent space in Europe.
Office space in London’s West End is now on average £65 per square foot in rent, higher than Paris’ rent charges of £60 per square foot and Moscow’s £56 per square foot.
Due to significant distress in financial markets, prime office space in the City has fallen to below West End rents to an average rate of £42.5, but this is still above Milan, Geneva, Rome, Frankfurt and Dublin.
City rents are at their lowest level for more than 20 years, while West End rents are at a 13-year low, Knight Frank said.
Prime UK office locations have dropped by 40 per cent on average since the property peak in 2007.
And in the last six months prime European office rents have declined on average by 12 per cent.
But recent commercial property deals, including Nomura and Catlin’s deals for office space, and reports of firms now battling for prime location in the City, have led experts to believe rents will begin to bounce back in 2010.
Knight Frank said the rapid rent repricing has tempted occupiers back to the market in an effort to exploit the tenant-friendly environment.
In Central London, prime yields have hardened, and now stand at 5.5 per cent in the West End, having reached six per cent earlier this year. This reflects improved investor confidence and increased competition for prime assets in Europe’s major office centres.
Joe Simpson, head of international research at Knight Frank commented: “While the current economic situation continues to create challenging conditions for European occupier markets, there are clear signs that investment markets have begun to recover, with investor demand improving in core markets, and prime yields stabilising or even hardening in such locations.”
Knight Frank forecasts that average prime rents will rise by four per cent in 2010 to £44 per sq ft.