Hotspot! Central London commercial property bucks trend

Total returns on central London office space increased month-on-month in March, the latest CBRE Monthly Index has revealed.

While commercial property transactions continue to struggle in many parts of the UK, activity is still going strong in central London, with total returns up to 0.6 per cent on March compared to 0.5 per cent in February, the report revealed.

Unsurprisingly, Nick Parker, CBRE senior analyst of economics and forecasting, believes that London remains a popular proposition for businesses, as it has done for years.

He said: “Investor demand is still present in the capital as investors are striving towards better assets with more secure incomes. They’re looking to London and they have been looking at London for years.”

He added: “If you look at central London offices compared to more regional hubs, business is looking brighter and the economy is looking stronger.

“It’s also a destination for occupiers who need to have a centre in the City or the West End and that drives rental growth which is obviously a very important factor when investors look for property.”

Central London office take-up was 60 per cent higher than February’s rate and although there was an absence of deals over 50,000 sq ft in March, the figures were boosted by an unprecedented rise in small and medium-size office deals.

This perhaps explains why office availability in the area fell back slightly during March from a two-year high at 16.3 million sq ft. The amount of office space under offer increased during the month to 1.83 million sq ft.

Referring to the central London office market, CBRE executive director Emma Crawford said: “March was comfortably the busiest month of the year so far in terms of number of deals and total amount of space transacted.

“An increase in space under offer and sustained levels of active demand, together with signs of a steadily improving economic climate provides optimism going forward.”

Parker went on to say: “[The London property market] seems to be doing relatively well. If you look at the trends now, it’s not quite what it was a year or even two years ago.

“Properties were rocketing, central London was rocketing so I think it’s more the stability within central London relative to the rest of the UK which is where the differential in returns come.”