Annual City rents leapt above 60 pounds ($113.7) per square foot in October, with demand for office space in London's financial district about 20 percent higher so far this year than in the same period in 2005, Savills said on Monday, according to Reuters. Total take up in the City in the first 10 months of 2006 was 5.1 million square feet -- 1 million more than the full-year average in 1981-2005, the property services firm said. However, supply is keeping pace with demand. With another 400,000 square feet of new developments coming on stream in October, the amount of empty office space rose to 9.3 percent of the City's total stock from 9 percent, Savills said. The vacancy rate had been almost 12 percent at the start of the year, it said. London's crane-dotted landscape is evidence of a boom in office developments as Europe's leading financial centre has expanded dramatically. Some real estate experts are wary of a repeat of the prolonged UK property recession seen in the early 1990s, when excess construction left the market with excess supply that took years to work off as the City entered a downturn. But some said there was greater discipline on the supply side than met the eye. "We remain concerned about the state of the speculative development pipeline," Mat Oakley, director of research at Savills, said. "However, there are some signs that potential 2008/2009/2010 completions are being reviewed where they have not yet started, and this might be enough to stop vacancy rates rising from 2008." The City is scheduled to get around 11.7 million square feet (1.087 million sq metres) of new office space in 2006-2009. Just over a fifth of that is pre-let, Savills data showed. The top City rent of 61 pounds/sq ft achieved in October compared with 39.50 pounds/sq ft at the start of the year and was seen rising to more than 75 pounds by 2008 and holding there in 2009, according to Savills. In the tourist West End district -- where London's hedge funds and private equity industry are mostly based and where supply is far more constrained -- top office rents are already above 100 pounds/sq feet and are forecast to rise above 125 pounds by the end of 2010, according to Savills. In the eastern Docklands district around Canary Wharf, where some investment banks and other typical City tenants have migrated, top office rents are 40 pounds/sq ft and set to rise above 50 pounds by 2009, Savills said. Savills said average rents in the City for Grade-A office space were about 43.70 pounds sq/ft and were not expected to breach 50 pounds by the end of the decade.
