Serviced Offices Blog


London Rental Values – the increase in conventional office rents has left serviced offices looking exceptionally good value.

Posted by admin on May 21, 2011 at 12:02 pm. Filed under: Uncategorized

It’s not just shares and commodities that have been enjoying rises in the last couple of years – commercial property has also been in recovery mode. Fund managers are feeling a lot more confident about the outlook. The UK commercial property market has experienced a remarkable polarisation post the financial crisis. At its worst point the asset class had fallen some 44% – an unparalleled event and worse than the early 1990s. Since the low point about eighteen months ago, there has been a recovery in prices as buyers return to the market but most of this activity has been confined to the very top or prime end of the market.

As a result of keen interest from foreign investors and sovereign wealth funds, ‘trophy’ properties have been bid up to the extent that they are now back to, or have exceeded, 2007 prices, driving some rental yields down below 4%. West End London offices are a good example; values have soared and rents are probably double where they were just a few years ago. In contrast, the prices of property perceived to be less glamorous have remained virtually unchanged, with risk-averse investors avoiding this secondary part of the market, despite the extraordinary high yields of close to double digits. So, unlike the equity markets, there has been no ‘dash for trash’ whereby investors have been happy to snap up distressed but fundamentally sound companies again.

The really interesting thing about the rental position right now is that whilst conventional office rents may have doubled in value, serviced office rents have remained at their low levels with no real prospect of any change in the immediate future. As a result, the differential between the two is huge and serviced offices are looking exceptionally good value at the moment.

Abacus Real Estate have a good stock of serviced offices to rent in London, particularly in the City of LondonMayfairCovent GardenOxford Circus and Victoria.