London commercial property rents rise by up to 181% over five years

Commercial property rents in London have risen by an average of 70% in the last five years, according to new research.

The research from EY identified Shoreditch as the area with the fastest rising rent – with average rents per sq ft rising 181% between 2010 and 2015.

Average rents increased from £33/ sq ft to £55/ sq ft over the five-year period, with four areas of the capital seeing their commercial property rents at least double (Clerkenwell, Farringdon, Shoreditch and St James’s).

St James’s was found to have the most expensive average commercial rent for 2015 at £91/sq ft, up from £43/sq ft in 2010. This was followed by Mayfair with £82/ sq ft and Belgravia/Knightsbridge with £72/ sq ft.

At the other end of the scale, Docklands was the area with the cheapest average rent at an average of £32/ sq ft, followed by the Southbank (£39/sq ft), Aldgate (£41/ sq ft), Euston/Kings Cross (£45/ sq ft), Clerkenwell (£45/ sq ft) and Farringdon (£47/ sq ft).

Russell Gardner, UK & Ireland head of real estate at EY, said: “London’s property market is and has been a special case. With a growing population, strong economic performance and a shortage of new properties, the challenges in the capital are a result of London’s own success.

“To see four areas of London with over 100% increase in average rent per sq ft in only five years is testament to this and reiterates just how popular central London is to a wide range of industries. Businesses are happy to increase their spending on commercial property to be alongside their competition in the same sector.”

Sector trends driving demographic shift

​Several areas have received sustained sector-targeted investment, with Southbank experiencing a 40% increase in transactions by the energy sector since 2010, while Victoria has seen a 29% increase in transactions by the services sector.

There has also been a rapid increase in transactions involving serviced offices across central London, with Paddington seeing a 32% increase since 2010 and Farringdon and Shoreditch experiencing rises of 52% and 43% respectively.

The services sector looks to be moving out of midtown and west London, with Covent Garden and Euston/Kings Cross reporting decreases in transactions of 48% and 40% respectively, and Belgravia/Knightsbridge and Marylebone experiencing transactions decreases of 34% and 31% respectively.

Farringdon has seen a near 30% decrease of education/public sector transactions, as well as a 24% decrease by those in the retail sector, with Belgravia/Knightsbridge potentially picking that business up after seeing a 28% increase in retail transactions between 2010 and 2015.

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