South-east office yields are set to fall by 50 percentage points to 4.25% by the end of the year, according to Knight Frank.
Speaking at the company’s annual M25 south-east research breakfast, Peter MacColl, head of investment predicted that yields in certain south-east locations could sharpen to 4.25% by the end of the year. The average prime office yield stood at 4.75% in the first quarter of this year.
According to Knight Frank, this is because there will be a ‘marked reduction in stock, which has kept significant pressure on yields for prime well-let opportunities and anticipated strong rental growth prospects in key centres'.
MacColl said: ‘Investors are now considering more peripheral office locations across the south-east in search of better value investment product, for example St Albans and key M1 towns.'
According to the research, Hammersmith will lead the way for rental growth with £37/sq ft (£398.26/sq m) poised to be achieved and Crawley. Hemel and Uxbridge will also perform well. The M25 market is also predicted to benefit from a rise in prelets.