Businesses are well aware that trading from an elite London address often comes at a price – with high demand helping to push rental costs up and up.
Firms recognise the importance of London office space, but there is always something of a balancing act when choosing their premises.
They need to have a base in the capital, but don’t wish to overstretch their resources by paying for a site they cannot afford.
This is why the introduction of new commercial property on to the market is always welcome.
When supply increases, it helps to keep commercial property inflation in check, ensuring companies have access to office space they can afford.
Ed Stansfield, chief property economist at Capital Economics, noted that at present, the development pipeline is looking “stronger than it has done for some time”.
“Despite the fact that the macroeconomic environment has deteriorated, the problems facing the banks have deteriorated and all the eurozone issues are rumbling on causing massive amounts of uncertainty, it does seem as though developers are pressing ahead with projects,” he stated.
Mr Stansfield commented that developers are not pulling back, deferring or delaying – which is good news for those seeking commercial property in the capital.
“We think that we will see an improvement in supply over the next couple of years,” he added.
“What is uncertain is how much demand will be there because of developments in the macro-economy.”
Mr Stansfield said there is scope for rents in the City and in the West End to “move back a bit” over the next couple of years.
This may not happen immediately, he noted “but as that supply pipeline comes back on, it could be that developers find once again that they have been slightly overoptimistic in estimating demand”.
Businesses will be very much hoping this is the case as they seek a bargain in one of the world’s most important trading cities.
