A demand for office space from tech and media groups within London is causing a shortage of high quality office space and pushing up office rents.
According to data from Deloitte, office space in London has hit levels that have not been seen since 2006. Mat Oakley, director of commercial research at estate agent Savills, said that “less empty space was left over from the economic downturn than in previous recessions, contributing to tight supply. An awful lot of developments were about to start in 2007/2008, but finance never materialised so a lot of buildings were just never built” he said. “The balance is clearly tipping in favour of the landlord for the next two or three years.”
More than a third of property under construction has been let and the amount of high-quality space available has halved in the past four years. According to Anthony Duggan, head of real estate research at Deloitte, the demand is forecasted to be twice the amount of new space under construction in the next two years. The total office space let to technology and media companies has hit a new high as demand from this sector rises. In 2007 just 8 per cent of all office space in London was let to this sector. This rose to more than 30% in 2013.
In an attempt to keep up with the strong demand, Workspace Group, an office space provider has started work on six new sites. With more than 90 per cent of it office space already let, their total rents rose by 7.6 per cent in the first three quarters of the year.