Incentives to tempt businesses to offices have got less generous for a number of new London developments as employers compete for modern space, research has found.
As at the second quarter rent-free periods, often offered to get longer leases over the line, typically ranged between 20- 26 months on a 10-year lease for new and refurbished Grade A space in central London on deals for 5,000 sq ft and above. The incentive is slightly higher in some peripheral locations, according to Carter Jonas.
The property consultancy said in Mayfair and St James’s rent-free periods have modestly reduced over the 12 months since the second quarter last year.
Top rents for deals over 5000 sq ft rose to £135 per sq ft in the second quarter of this year, up from £125 per sq ft in the prior three months.
Meanwhile in the core City area in Bank and around Leadenhall Street prime headline rents have been stable at £75 per sq ft, but a shortage of top stock resulted in a “modest fall” in typical rent-free incentives during the second quarter.
Michael Pain, head of the tenant advisory team at Carter Jonas said: “The compression in rent-free periods demonstrates that demand for grade A office space with good green credentials is outstripping supply in some sub-markets, reflecting declining vacancy and the keenness of occupiers to secure good quality space that underpins their return to the office, recruitment, wellness and environmental policies.”
But the company cautioned that owners of older buildings that may be less desirable to firms wanting to upgrade, many of which could be exposed to employers looking to trim how much space they occupy, could have tougher times ahead.
The report said: “In contrast to the market for prime space, rent free periods for secondary space with poor environmental credentials have seen little movement over the last twelve months. This is not likely to change, and in many districts, the gap between prime and secondary property is likely to widen further in the coming quarters.”