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Prime London office values 'have peaked'

The value of prime London office space may now have peaked, it has been revealed.

James Roberts, head of central London research at Knight Frank, said many of the poorer areas of the capital are gaining prominence in terms of popularity among renters and this is impacting demand in the prime sector.

Areas like Shoreditch and Clerkenwell are proving extremely popular with technology start-up businesses in particular, with investors beginning to now focus outside of the prime sector in order to achieve returns.

He commented: "I would say that prime, particularly trophy assets in core locations, have risen in price as high as they will go this cycle. However, due to high foreign buyer interest, attracted by sterling weakness and London's status as a global business hub, I expect prices to plateau, not fall.

"Next year, we may start to see price growth for development sites in anticipation of future rental growth."

However, Mr Roberts added there are two major developments that are taking place in the prime office sector of London at present - the 615,000 sq ft Leadenhall Building and the 673,000 sq ft 20 Fenchurch Street development.

Furthermore, Park House in the West End is nearing completion and will provide an additional 165,000 sq ft of prime office space in the capital in the coming months.

All of these projects mean pent-up demand may soon be alleviated, as the market becomes flooded with new office options for renters.

According to data compiled by IPD this month, average office prices in the City of London fell for the second consecutive month in July.

This is the first time since August 2009 that the prime real estate area has recorded two consecutive monthly falls and comes despite ongoing pressure on prices from overseas buyers.

However, the report highlighted the fact that over the last three years, the City has witnessed a cumulative growth in values of more than 36 per cent. 

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