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Renting office space in London to become costlier in 2023 – J.P. Morgan
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(Reuters) – Office spaces in London could be expensive to rent next year due to a supply crunch, J.P. Morgan analysts said on Wednesday, as developers are being restricted from creating new spaces and leases have begun to shorten.
(Reuters) – Office spaces in London could be expensive to rent next year due to a supply crunch, J.P. Morgan analysts said on Wednesday, as developers are being restricted from creating new spaces and leases have begun to shorten.
Analyst Tim Leckie expects active demand for prime office space to grow 38% in 2030, but said supply would become tight from 2023, with increasing barriers on developing new spaces.
“By 2025 demand for London prime space could be 1.8x that available, and prime vacancy will be close to zero, putting upward pressure on prime rent,” he added, with the brokerage forecasting rentals increasing 10% per year.
British commercial property developers returned to profit in 2021, buoyed by strong leasing momentum, after rentals fell during the pandemic and people now return to the key office hub of London.
Leckie said as companies face investor and government pressure to meet net zero targets, tenants will prefer to reuse existing spaces, causing a supply glut.
The brokerage on Wednesday upgraded Great Portland Estates and Derwent London to “overweight” from “neutral”, and also raised its rental growth expectations for the companies.
Shares of Derwent London were among the top percentage gainers on the UK mid cap index, they rose 2.24% to 3190p, while Great Portland gained 1.28% at 712p.
The brokerage said it sees limited benefit for Land Securities and cut the rating on the stock to “neutral” from “overweight”.
(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Amy Caren Daniel)
Commercial property refers to real estate used for business purposes, such as offices, retail spaces, and warehouses. It is typically leased to tenants for generating income.
Rental growth is the increase in rental prices over time. It is often influenced by demand, supply constraints, and market conditions in the real estate sector.
Prime office space refers to high-quality office buildings located in desirable areas, often characterized by premium amenities and high demand from businesses.
Net zero targets are commitments made by organizations to balance the amount of greenhouse gases emitted with an equivalent amount removed from the atmosphere, aiming for a sustainable future.
A supply crunch occurs when the demand for a product or service exceeds its supply, leading to increased prices and potential shortages in the market.
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