Rents rise by 25 per cent in City of London

Office rents in the the City of London have surged by nearly 25 per cent so far this year – the strongest three quarters of rental growth since records began, according to NB Real Estates, the commercial property agency owned by Capita Group.

The company said that average rents for Grade A offices in the City increased from £42.50 per sq ft in the first quarter of 2010 to £53 in the third quarter.

It put the sharp rise in prices down to a severe undersupply of office space, with new developments having all but dried up as a consequence of the recession. Supply of available space has fallen to a two-year low and over the last 12 months availability decreased by 27 per cent from the 8.6m sq ft that was available in the third quarter of 2009.

James Gillett, its director of city offices, said: "Rents have rebounded 25 per cent so far this year as vacancy rates have fallen and the supply of high-quality space has dwindled."