King Sturge is forecasting that West End office rents will rise by 8.5% to £89.50 ($124.40) per sf by the end of this year and by 5.6% to £94.50 ($131.35) per sf in 2002. In the City, they are forecast to rise 12% to £65.50 ($91) per sf this year, rising 7.6% to reach £70.50 ($98) in 2002. And top office rents in the West End are forecast to break the £100 ($139) per sf barrier in 2004.

The reason for this continued growth, at a time when occupiers are becoming less willing to commit themselves to expansion, lies in London's very tight supply, according to Dr Angus McIntosh, head of research at King Sturge. He pointed out that, of the 8 million sf of office space currently under construction in central London, 7 million sf is already pre-let. "For a city with a stock of 180 million sf of offices to have a speculative pipeline of just one million sf is ridiculous,' says McIntosh.

The lack of supply reflects very strong take-up in recent years. In 2000, 18.5 million sf of office space was leased in central London--an all-time record. This compares to around 10.7 million sf in 1999 and 16 million sf in 1998.