According to the latest RICS UK Commercial Market Survey demand for office space in Greater London rose dramatically during Q1 2011, with 43% more surveyors reporting increases rather than falls in demand. Office space in Central London also saw a strong increase, moving from a net balance of 17% to 39%.
The main driver in demand appears to be from the financial services industry and ancillary professional service sectors looking to expand as their trading environment improves.
As available space struggles to keep pace with demand in London, interest from occupiers appears to be extending out beyond the capital. The South East was a significant beneficiary of this emerging trend, with surveyors reporting increased interest in office space, particularly from small to medium enterprises.
Nationally, tenant demand picked up at a quicker pace in Q1, with 10% more surveyors seeing a rise in demand rather than a fall. Across all the regions, the net balance for demand was in positive territory, suggesting a broader recovery in firms' appetite to increase their businesses.
Commenting, Simon Rubinsohn, RICS chief economist said: "London still appears to be where most of the activity, whether in the investment or occupiers markets, is taking place. This reflected in rising rental expectations especially in the prime office sector and a healthy recovery in capital values. The survey does encouragingly suggest that demand to take up space is growing outside of the capital but not at a sufficient pace to change the mood on the rental outlook.''