And rents are likely to remain under pressure, with vacancy rates across the region up by 1.7% in the last six months to 13% and supply levels up by 36% against the same period in 2001. Mark England, head of South East office agency at Atis Real Weatheralls said: "We are seeing increasingly generous incentives packages as landlords seek to entice potential tenants; a standard rent free period on a 10 or 15-year lease is now around 12 months."
But despite the poor performance of the occupier market, prime investment yields are hardening across the South East region at an average of 7%. Tim Bowring, director in Atis Real Weatheralls investment agency said: "While values in the occupier market continue to suffer from falling demand and increasing supply, the investment market is not following suite. Values are continuing to rise due to the intense competition from private buyers seeking safer havens in the face of poor performing equities and this is encouraged further by the continuing low level of interest rates which remain at 4%."
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