The return of the £100/ft2; super-prime rent?
Mark Bourne, partner in the JLL office agency, predicts that 2011 will be the year of the super-prime rent in London, as a shortage of the best office space drives up rent levels for core locations and trophy buildings. He also expects this to be the year of the tower, with work on the Walkie-Talkie and Cheesegrater buildings to start and The Pinnacle and 100 Bishopsgate also set to proceed on a pre-let basis.
While Bourne forecasts that prime rents in the City could reach £70 per sq ft, he thinks niche financials will push up rents in Mayfair and St James to more than £100 per sq ft – the first time this level will have been seen since the collapse of Lehmans.
In general, JLL is forecasting 14% rental growth for prime office space this year, following a 20% jump in 2010, and expects landlord incentives to come down by at least 30%. Rents will be much slower to pick up elsewhere, Bourne says, with increases possible in pockets of the South East but no uptrend forecast for 12 months or more in the regions.
While demand is expected to remain under pressure in regional markets, Bourne thinks that Glasgow, Bristol and Manchester are best placed for a recovery in take-up levels. He also points out that changes to accounting rules, which bring leases onto the balance sheets of listed companies, could mean that owner-occupation becomes more attractive, putting further pressure on lease lengths this year.
