Competition between insurers and non-insurers is set to drive demand for grade A office space in the City of London (EC3), according to recent research from real estate consultancy DTZ.
Insurers are tied to the district due to operational reasons, the very strength of the London Market for commercial insurance and reinsurance is the presence of so many of the major international players in a single location, as well as its pool of specialist knowledge and the network of contacts of the market's workforce.
However, other companies are being drawn to EC3 due to the quality of space being developed, creating competition for what little developments there are, with most not due for completion until 2009.
With the increase in demand from insurers, competition is becoming such that these firms will be forced to pay higher rents or look to areas such as Aldgate (E1).
Alistair Brown, director at DTZ, commented: “Consolidation of insurance firms coupled with demand from non-insurance firms ensures that competition for space in EC3 is at a high. Due to the operational need for those firms in the commercial and reinsurance practices to remain in EC3, they are often paying higher rents to secure the space they need while those that cannot find the space they need in prime EC3 are forced to consider locations such as E1.”
