Central London rents are expected to fall by 20% over the next two years, a report by the British Council of Offices (BCO) has said.
In its report on office demand in the UK, the BCO said central London’s office rents were too inflated, and would suffer a 20% correction up until 2010.
Top rents in central London, focussed on Mayfair and St James’s, are 70% higher than Mumbai, Moscow and central Tokyo, the next most expensive cities in the world.
‘We expect London will be the worst affected region in Britain because it has seen the greatest rental increases and the strength of its finance sector means it is most exposed to the effects of the credit crunch,’ the report said.
‘Furthermore, office construction in the capital has boomed in recent years in response to the surge in rents, which means a large quantity of supply is set to come on-line during a falling market.
‘The combination of weaker demand and rising supply means that we expect central London to experience a substantial fall in office rents over the next two years of at least 20%.’
The report said the rise in rents meant the south-east was now a more successful city than London when profitability was compared with the number of workers.
The report said the medium term outlook for central London was bright because it is still ‘considered to be an excellent place to do business.’