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London's commercial property high in demand


Commercial property pricing in London has been outpaced by Hong Kong and other key cities in recent years. However, the latest report by global property consultancy Knight Frank indicates that rent prices in London are increasing at exponential rates.

Alongside the importance of the M25 motorway to property valuation, London is set up for high property feasibility for investors, and is gaining key interest internationally.

London's skyscrapers

"The austere business environment of the Global Financial Crisis is becoming a distant memory."

While Hong Kong maintains its top ranking for highest price of skyscraper office space available, London is experiencing high growth rates on global scale.

Knight Frank has recently recorded the highest level of rental growth for London's skyscrapers. The report attributes London's growth rate to low vacancy rates, a key contributor for property feasibility. Knight Frank notes that vacancy rates have reached the lowest level since 2001. 

Another city that is gaining on London's high rates is San Francisco. The tech city experienced a rise of over 8 per cent more than any other US city, largely due to the significance of the tech sector in property development.

The Head of Commercial Research at Knight Frank, James Roberts, emphasises the importance of accurate development feasibility as the right timing can yield high return on investment.

"When construction started on the latest wave of London towers a few years ago, it was to the backdrop of the Euro Crisis, and some commentators said the developers had got their timing wrong," says Mr Roberts.

"However, the doubters have been proved wrong, with skyscraper rents in London at a record high. In part, this reflects increasing appetite for exclusive space, now the austere business environment of the Global Financial Crisis is becoming a distant memory."

Investment near London's M25 is set to break the nvestment on track to break £3 billion mark.Investment near London's M25 is set to break the £3 billion mark.

How the M25 impacts property valuation

The occupier rate for property near the M25 motorway in London is continuing to rise, with Knight Frank reporting a 30 per cent increase year-on-year. This is only expected to rise, with Knight Frank estimating investment will break the £3 billion mark by 2017. 

According to Knight Franks estimates, the third quarter for 2015 revealed that a further £735 million had been invested, bringing overall figures to £2.6 billion. These volumes are likely to rise, as there is more investor interest than property available and a number of key deals expected to be completed before the end of the year. 

This continued focus on the area is largely due to the high rates of rental growth resulting in favourable return on investment for these properties. Knight Frank notes the emergence of global buyers, with many investors from the Middle East showing interest in London property.

The importance of accurate development feasibility 

In the case of London, the investors who were able to accurately evaluate development feasibility immediately after the Global Financial Crisis are reaping the benefits. As London increasingly becomes an international business hub, the rent prices for commercial property is only expected to increase. 

Ensuring you have a property development plan can help keep you one step ahead of market trends.

However, it is also important to understand how different factors can affect property feasibility rates and ensure these are taken into consideration. In a global market, accurate and efficient valuation is key to acting upon investment opportunities as soon as they are presented. 

Date Published: 22 Oct 2015
Category: General News

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