The office market of central London could soon be looking at record-breaking double-digit growth in the rental market in the commercial property sector throughout the coming year according to analysts. The principal reason for such optimism is the return of occupier growth led by expansion, which is the result of the recent upturn seen in both the financial markets and global trade.  Property consultants, Frank Knight, also believe that low levels of speculative development will most likely result in a dramatic fall in levels of availability during the coming two years thank in no small part to the number of favourable mortgage rates currently on the market to help stimulate the sector.

Property market analysts also speculate that a growing number of institutional property funds are likely to be buoyed by the prospect of investing in the coming year, and many also feel that a recovery in property prices will most likely be sustainable due to the fact that market activity has been in line with that seen in past cycles. It has also been forecast that prime rents in the City of London are set to see an increase of 19% in the coming year, rising to just under £53 per square foot from the 2009 level of £44. The price rise is principally a result of the shortage of top-quality office space as well as more buoyant demand from tenants. Over the coming five year period it is speculated that rents per square foot will go up to £67 towards 2014, which represents a five-year rise of 52%.

Analysts believe that as a result of far lower levels of new developments in London over the previous two years they feel that supply will be significantly squeezed over the coming two years, with some predicting a supply crunch for 2011 – particularly if foreign banks offering overseas mortgages for investment in England remain strong in the future. Rents in the London West End market are expected to record a record growth figure of 11.5% for 2010, rising to just under £73 per square foot, which is up from last year’s figure of £65, also a result of a limited number of new development schemes. It is felt that there is likely to be much higher demand for office space from specialist find managers in the coming year as a result of recent improvements in the financial markets, and this also would contribute to eh expected supply crunch, as the amount of speculative space current under construction for 2010 stands at a meagre 106,000 square feet.