That is the view held by Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, who expects the cost of renting business premises to increase.
Levels of available floor space across London are predicated to fall according to the latest UK Commercial Market Survey by the Royal Institution of Chartered Surveyors (RICS), signalling higher rents for prime office space and a raised investment activity in London’s outer suburbs. The report - covering the 2nd Qtr of 2011 - revealed that the supply of Central London offices fell for the 6th consecutive quarter.
Providing further evidence that the development pipeline of newly built and refurbished office space has not kept pace with strengthening demand from tenants searching for London office premises.
Commenting on the report, Mr Rubinsohn noted that the lack of office construction activity in London will, sooner or later, catch up with the industry, and said: "There are one or two high-profile developments in London, but the likelihood is that it is going to be insufficient in terms of new top-quality commercial office space coming on to the market."
Mr Rubinsohn also highlighted that the current inability by the development sector to satisfy demand for business headquarters would lead to London office rents increasing further. With office vacancy rates falling RICS noted two further consequences of the strength of the London office market, which are that landlord inducements are falling rapidly while new development starts are now rising.
He also drew the conclusion that commercial property investment could spread to the outer London suburbs.
The RICS report anticipates that a growing shortage of supply in London commercial property may force property developers, fund managers and REITs to target business centres beyond the M25, providing a welcome boost to the major commuter towns in the South East.
Having already observed indications of this emerging investment trend, Rubinsohn added "There may be some ripple-out effect in other parts of the capital and possibly a little further afield - parts of the south-east or the Thames... We are seeing some trends in greater London offices to reflect that."
New research from Equipe real estate has also revealed that office take up in the West End grew by 22%, whilst overall Central London office space lettings grew by a healthy 10 %.