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London Office Submarkets ''Are Strengthening''

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Real Estate Investment  London  Capital Economics  Ed Stansfield  Commercial Property London  Sue Foxly 

London Office Submarkets ''Are Strengthening''

By - Monday 18 June 2012

An increasing number of occupiers looking for premises to let in London are turning away from the West End and looking at lesser known and cheaper locations. Ed Stansfield, chief property economist at Capital Economics, explained the main reason offices outside the West End are growing in popularity is because rents in the district have increased substantially and are now too expensive for many companies.

Cluttons recently identified Noho, Marylebone, Soho and Covent Garden as office submarkets to watch, noting an influx in new occupiers has helped push rents up by six per cent in these districts in the six months to the end of March 2012. Head of research at the firm Sue Foxley stated the strong activity in these submarkets has attracted interest from property investors. "Vibrant lettings activity in those edge-of-core submarkets is boosting investor interest, driving potential for a slight inward yield movement this year," she asserted.

Mr Stansfield, meanwhile, expects interest in these submarkets to continue until rental costs become more even, "either because West End rents come back down a little bit or rents in the rest of London are bid up to higher levels, so that there is less of a differential," he elaborated. Despite this shift in interest to edge-of-core locations in London, Ms Foxley pointed out real estate investment in West End office markets is still strong, with overseas investors continuing to plough money into the sector as it is seen as a safe haven in times of economic turmoil. It isn't only offices in the West End that are perceived as a sensible investment at present, with figures published earlier this month by CBRE showing commercial property transactions in central London have totalled GBP 6.3 billion so far this year, up by 50 per cent on the same period in 2011.

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