Take-up of office space in central London reached a record level of 3.4m sq ft in the last quarter of 2006, according to research by GVA Grimley.
This represents the highest quarterly total for over two years.
The central London office commentary reports a 21% increase in office take-up on the previous quarter, 56% higher than the five-year quarterly average.
The total take-up of office space in central London for 2006 was 10.6bn sq ft, a growth of 24% on the previous year and the highest annual total since 2001.
The report found demand for office space in central London is continuing to rise and the lack of good quality space is leading to increased rents and, in the core locations, making it difficult for some potential tenants to find accommodation.
By the end of 2006, the central London vacancy rate was 6.1%, the equivalent of 11bn sq ft of available office floor space and the lowest level for over five years.
At the end of the year, prime rental growth was 19.4% pa in the West End, 17.5% pa in the City and 13.3% pa in Docklands.
Prime rents finished the year at £92.50 per sq ft in the West End, £57.50 per sq ft in the City, and £42.50 per sq ft in Docklands.
In the final quarter of the year, central London office investment transactions totalled £3.7bn, 61% of which by value were in the West End, the remainder in the City.
As with the previous two quarters, there was no investment activity in Docklands.
Over the final quarter, prime office yields in the West End and City cores remained at 3.75% and 4.25% respectively.
