There have been 18 months of faltering net effective rents within the commercial office market in the Capital since the Brexit referendum, with ten of the 18 Central London office submarkets monitored in Cluttons’ latest London Office Market Outlook report registering rent falls in the final quarter of 2017, buoyed by additional incentives such as contributions to fit out costs and even delayed completions becoming commonplace in many locations. The report also raises concerns about the potential for an oversupply of serviced offices within the Capital. However, despite this and a perception that Central London offices are currently fully prices or possibly over-priced, by both occupiers and domestic investors, London remains a resilient city, continuing to attract high volumes of overseas capital. Employment growth is of course expected to be influenced by both the levels of GDP growth during 2018 and the Brexit divorce proceedings, which in turn will affect rental values. But says the report, aside from concerns over Brexit, there is no evidence from recruitment agencies to suggest a current, or planned exodus of finance and banking professionals from the City.
The current picture suggests that West End locations like Noho/Soho/Covent Garden and Paddington remain resilient, with rents holding steady, underpinned by low vacancy rates (circa. 4 percent, CoStar), limited development pipelines and proximity to the Elizabeth Line (Crossrail).
Meanwhile, Canary Wharf has become “a bargain location”, where occupiers are almost certain of securing a good deal. For instance, some space is available from as little as £37.50 psf, accompanied by a 30-month rent free period on a 10-year lease; something that is unmatched in many other Central London locations.