West End and City office rents will rise to historic highs in the next four years, Knight Frank has forecast.
At its central London 2014 breakfast, the agent said prime West End rents will increase this year to £105 per sq ft – up from current rents of £97.50 per sq ft. The figure is set to soar 23% to £120 per sq ft by 2018.
In the City, current prime rents of £60 per sq ft are expected to rise to £65 per sq ft by the end of 2014, and to £75 per sq ft by the end of 2018.
The forecast follows strong demand last year, where take-up reached 13.1m sq ft in central London – a 41% rise on 2012.
James Roberts, head of commercial research at Knight Frank, said: “The technology, media and telecoms sectors accounted for nearly 4m sq ft of take-up in 2013, which is more than double the 1.9 m sq ft figure for the financial sector.
“Moving forward we see more diverse demand coming through as the economy continues to strengthen, like ‘Fin-Tech’ firms, who straddle the worlds of finance and technology.”
As a result of the large deals, supply fell from 16.5m sq ft to 16.1m sq ft across central London.
Philip Hobley, head of West End leasing, Knight Frank, said: “A lot of firms in 2011 and 2012 were put off launching office searches by the worrying economic news, but there was more confidence around in 2013. Many of those launching office searches this year and next are going to be surprised by how limited their options are, and this will generate competitive bidding for the best-quality buildings.”
The investment market transactions in the London office market hit a record high of £19.6 bn in 2013-an increase of 42% on 2012.
Stephen Clifton, head of central London at Knight Frank added: “London’s office market rebounded last year, and the momentum is set to continue