The M25 South East office market is turning into a ‘landlord’s market’, with a lack of supply pushing up rents and reducing tenant incentives, according to the latest research by Savills.
The research found that take up in the region had increased to 3.4m sq ft in the first three quarters of 2007, the highest since 2001.
This had pushed up rents to above £30/sq ft in areas like Chiswick, Uxbridge and Maidenhead.
The report remained upbeat for 2008 despite the recent turbulence in the financial markets, suggesting that the outlook remained positive.
Jonathan Gardiner, director of Savills’ regional office agency team, said: ‘Owing in chief to a lack of supply of quality Grade A office accommodation, the M25 West area is fuelling a return to a landlord’s market. In order to secure quality product in good towns, tenants are limited in their ability to negotiate on price or incentives and landlords remain in a strong position.’
Supply to drop
The report predicts that the total level of supply will drop to around 17m sq ft in the area by the end of the year – down by 22% on 2006.
Supply will diminish further next year as most of the major speculative schemes in the area are not due for completion until 2009/2010.
It also found that market sentiment suggested that demand has strengthened, with a substantial level of lease breaks and expiries due in the next five years adding to projected further demand.