London is a major centre for many of the world’s financial and banking organisations. With the City of London containing a range of important businesses and banks, and other areas such as the West End featuring a range of prestigious addresses, office space can command significant prices. But now London office space looks set to rise, along with other European cities.

Higher prices, less incentives

Figures released by a financial and professional services firm have now revealed that rent prices in the West End of London have increased by 13.3% in the three months from April to June 2010. At the same time the amount of incentives offered by London’s office space landlords have dropped.

When it comes to office space in London, prospective tenants are usually offered a range of additional services such as office cleaning and reception staff. When landlords want to increase the amount of their office space being taken up with tenants, they can offer a choice of extras included in the rent. But now these extras are being withdrawn completely or have a premium attached to them, as the cost of renting office space in London increases.

Choosing an office in London can be based on a wide range of factors including price, size, location and services included. During the latest period of economic uncertainty office space rent prices in London dropped as demand fell, and many businesses attempted to protect themselves from the economic downturn by reducing their costs. Yet despite some signs of economic recovery, many businesses are remaining cautious. Fears surrounding the markets and the economic outlook for the UK and globally mean that although demand for office space in London has increased, it has not soared to new heights as some analysts had previously predicted.

The outlook for the economic situation in the UK remains uncertain, although many experts agree that some kind of recovery has taken place. This could mean that demand for London office space could increase, so this could explain why many areas of London have seen substantial increases in office rent prices. By dropping their incentives, the landlords of these office rental properties seem to be suggesting that demand will be enough for them to not have to throw in extras to attract interest.

Demand drops across the UK

However, the Royal Institute of Chartered Surveyors has reported that in July tenant demand for office space actually decreased in the second quarter of 2010. This decrease happened across every single region of the UK, and London saw the biggest decline in tenant demand for office accommodation. If demand turns around and more businesses seek to relocate to London, expand or simply move to a more preferable location, then London office space could become more in demand, and landlords could push prices up further.

The pattern seems to be repeated in other European cities such as Paris in France and DÜsseldorf in Germany. What impact these higher rents could have in the wider economy remains to be seen, but what is certain is that London office rental prices are set to rise.

Author Bio: Shivani Gurtu-Louth – Operations Manager of Devono Property Limited. Devono are the only commercial estate agents in London to represent tenants looking for london office space and commercial property to rent / lease, enquire for offices now. For interviews, quotes, images or comments contact: Shivani Gurtu-Louth Devono Operations Manager Tel(DDI): +44 (0)20 7096 9911 E-mail: sg@devono.com

Category: Business
Keywords: london office space