Non-London office space rents ‘encountering downward pressure’

23rd April, 2012 - Posted by admin - Comments Off

Companies which are looking to expand their business strategy by investing in new office space are encouraged to look outside of London.

This is after Kelvin Davidson, property economist at Capital Economics, pointed out that vacancy rates for offices in the capital city are currently below average.

In comparison, the existing stock of offices in regions other than London is generally above the average vacancy rates of the UK.

Explaining why this is the case, Mr Davidson pointed out: “You have got downward pressure on rents simply because there is lots of space available and that is to do with the fall in demand.”

The expert went on to note that he does not believe there will be much change for the foreseeable future either, “so rents and prices are going to continue to go down in most markets”.

However, Mr Davidson was keen to state that there are some downsides to lower rents for office space across the country.

“The caveat is that nothing is being built, so at some point when a recovery in demand comes, the lack of supply will tend to limit the size of any falls in rent and perhaps produce a stronger recovery than otherwise when demand eventually starts to rise again, but we can’t see that for a while yet,” he explained.

Businesses should look towards the good point though, the expert added, with this being that a high supply of spare office space will mean a reduction in the rate of rents for such facilities.

Mr Davidson’s comments were backed up by recent statistics released by the Investment Property Databank.

Throughout March, the organisation found that commercial property capital values dropped by 0.3 per cent across the three main industry sectors.

On the flip side, the total return in this area also decreased to reach 0.2 per cent – the lowest figure that has been recorded since June 2009.

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