The real estate firm says that in the current market it is seeing evidence of increased occupier demand at a time of reducing supply of prime space.
Jones Lang LaSalle analysts believe this could result in several different scenarios. Firstly increases competition amongst occupiers. ‘The supply of large units ready to move into is tightening and without a significant increase in speculative starts, options for occupiers will become increasingly limited,’ the report points out.
Secondly strong rental growth and fewer incentives as with eroding supply prime rents in the City and West End core are inevitably on an upwards trajectory, as is the case across other central London submarkets.
There could also be an increase in the number of properties being pre let. ‘Given the shortage of available prime space, major occupiers will need to consider pre-letting as a way of resolving their future real estate needs. Even in this regard the numbers of unencumbered schemes are limited,’ the report says.
Other scenarios include a re-gearing of existing leases as a result of constrained supply and rising rents. However ability to extract value from lease re-gears will diminish.
And the expansion of central London into emerging new districts such as King’s Cross, Southbank, Clerkenwell, Shoreditch, Aldgate and Farringdon.
The firm added that it is also seeing the rapid development and emergence of newer districts such as Battersea and Nine Elms, Royal Docks and Silvertown.
‘London is emerging from the global recession even stronger than before and is today the main contender for a position as the leading global city for business and culture,’ said John Duckworth, responsible for occupier services on the UK Board at Jones Lang LaSalle.
‘Major facilitators of change such as infrastructure investment, demographics, and the impact of technology are re-shaping both the traditional definitions of the makeup of the London property market, through to the types of companies and where and how they physically locate,’ he explained.
‘New hotspots, new sub markets and new definitions around the workspace itself will accelerate this change. The businesses that anticipate, plan and future proof around these forces will derive great benefits around aspects such as cost control, brand enhancement, sales, staff retention and overall productivity,’ he added.
