Office rents across the UK have held firm over the last three months according to Carter Jonas' Commercial Divsion. All 11 of the firm’s commercial offices recorded a stabilisation in prime rental levels and incentive packages during Quarter 3, indicating that the bottom of the market may have passed and tentative signs of recovery are becoming increasingly evident.

Central London saw an increase in enquiry levels during Quarter 3, primarily from tenants whose leases expire in 2010/11 and who wish to take advantage of historically low rents and fulsome incentive packages. Michael Pain, a Partner in the firm’s Mayfair office stated “In certain cases, tenants have found themselves in the very unusual position of considering moving to better quality space on lower cost terms compared to their existing space”.

Central London, frequently perceived as the catalyst of the UK office market has witnessed renewed interest from the insurance, management consultancy and legal (litigation biased) firms with Macquarie Bank, Bloomberg, Nomura Securities, AstraZeneca and QVC Shopping Channel all reactivating their office searches within Central London over the last three months.

The City of London office market has been given a boost following the recent letting of Watermark Place,
c. 500,000 sq ft, to Nomura.

Whilst regional office markets have yet to experience a similar increase in demand levels to date, they have been cushioned by the fact that prime rental levels have remained broadly stable and in some cases seen a slight increase from their 2007 levels, as illustrated in the graph below. This is in sharp contrast to Central London where rents have fallen by circs 35-40% from their peak in 2007.

Catherine Penman, Head of Research at Carter Jonas, comments: “The regional office market has weathered the economic downturn comparatively well, which is due in part to the increasing diversity of occupiers within each market, in contrast to Central London, which tends to be dependent upon a smaller number of key sectors. 

“In addition, the quick response to changing economic signals by developers to slow the volume of new space coming to the market has avoided a landslide in terms of headline rental levels. However, this masks the significant rise in incentive packages offered by landlords over the last six months although our research suggests these have now stabilised and should hold firm until spring 2010”.