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Asia Pacific investors vying for high quality offices in London

In its winter West End office update, property consultants and chartered surveyors Cluttons reports that the limited development pipeline is likely to see an increase in the number of pre-lets secured.

Despite shifting occupier dynamics emerging from cost conscious approaches, prime space in the most sought after locations in London continues to attract interest.

The lack of quality floor plates in London’s West End has caused vacancy rates to drop to an annual low of 4.1%, further adding to upward pressure on rents in ‘rising star’ submarkets such as Noho, Marylebone, Soho and Covent Garden.
Cluttons forecasts that London’s West End office market will see rental values grow by 4% to 4.5% in 2013 and 4.5% to 5% in 2014.

The research also addresses the robust nature of the investment market in prime Central London, highlighting the increasing presence of Asia Pacific investors which are vying with active UK REITs for prime, low risk, commercial opportunities.

‘We are seeing Malaysian, Singaporean and Hong Kong investors reinforce their position in the market and expect this trend to continue into 2013. However, domestic funds remain active and account for 75 per cent of all transactions and we expect capital values to remain stable as competition between investors increases,’ said Sue Foxley, head of research, Cluttons.

‘Despite the general resilience of the market, landlords are in danger of losing tenants as occupiers look to cut costs and relocate at lease events. Re-letting is proving difficult and we believe it is becoming increasingly important for investors to work to retain tenants,’ she added.

The report also shows that £1.4 billion worth of investment transactions were completed in the third quarter of 2012 with yields for prime space remaining tight and it is set to see very little growth from 4% over the next five years.

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