London Office Rents Soar as Demand Surges and Supply Dwindles
London's prime office rents are soaring faster than anticipated, with analysts at Panmure Liberum noting a 'collapsed' demand shift from peripheral markets to core areas like W1 and EC2, driving up prices for top locations. This trend, coupled with an undersupply of prime office space projected by Knight Frank, is leading Panmure Liberum to describe certain stocks as 'very attractive', despite broader stock market today conditions.
Panmure Liberum highlights the surge in London office rents, attributing it to a tight supply, a 'flight to quality', rising landlord costs, and construction slowdown. Despite rents being under pressure since the pandemic, the genuine surge in demand is driving up prices. Derwent reports a 'significant supply shortage' at the top end of the market, with demand well above the long-term average.
Genuine Portland Estates (GPE), despite falling nearly 60% from its 2020 peak and underperforming the FTSE 250 this year, is seen as 'very attractive' by Panmure Liberum. This is due to GPE's annual rental growth of 12.5% over the last three years. Panmure Liberum sees an 'excellent opportunity' in GPE shares at 308p, despite stock market today conditions. The broker believes listed commercial office firms are undervalued on the stock market today due to rising rents in the capital.
The London office rental market is experiencing a rapid increase, driven by strong demand and limited supply. Despite broader stock market today conditions, certain stocks like GPE are seen as attractive investments by Panmure Liberum due to their rental growth and potential undervaluation on the stock market today.
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