End of the tenants' market?

Final quarter projections from the RICS point to continued strong demand for office space, especially in London, and consequently a likely rise in rents.

Strong performance in the financial and business services sectors is a key factor in increasing demand for commercial property in most parts of the country. Confidence in central London, in particular, has jumped sharply, says the RICS. Even demand for second-choice locations is up, reflecting the difficulty of finding accommodation on prime sites.

Chief economist Milan Khatri notes: "Tenant demand is strengthening for most types of property, although an acute lack of suitable buildings to meet modern day needs is hampering activity and pushing rents up."

The RICS report adds that this change in the balance of the market is beginning to lead to a lengthening of lease periods and fewer incentives to prospective tenants.

Elliott Chase