Despite London office investment remaining in the doldrums, record rents have been achieved in several submarkets across the capital so far this year, according to the team at DeVono.
The tenant-focused agency said eight submarkets have posted record office rents for prime space over recent months, including Soho, King’s Cross and the South Bank. DeVono’s rent reviews take into account recent deals as well as negotiating levels for live transactions from the firm’s agency team.
Shaun Dawson, DeVono’s head of insights, told EG: “The best-in-class office buildings have always commanded a higher price, but occupiers are now having to dig that bit deeper to secure the next generation of London offices following a surge in rental growth at the start of 2023.
“Even with a high level of office availability, ongoing economic distress and a dip in leasing appetite, upward pressure remains on prime grade-A office rents for the remainder of the year.”
Tenants will still have room for negotiation, said Ben Ashby, director in DeVono’s occupier advisory team – although only when it comes to particular space. “A tenant’s negotiating power is, without question, strongest on buildings which are either unrefurbished entirely or, at best, have been subject to a light-touch schedule of refurbishment works,” Ashby said.
“In this market, rent-free periods and capital contributions are at their highest, as landlords who have been hesitant or shrewd with investment on their building refurbishments are more likely to have to concede larger incentive packages to attract tenants and secure deals.”
Ashby added: “This cannot be said, however, for the super-prime end of the market, where building owners are far more rigorous on granting lease flexibility and conceding overly generous incentives.
“The demand from tenants for this high-end level of office provision is such that landlords are confident in their product and as such will not have to capitulate on their negotiations.”
To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews
