In fact, anyone taking space now might be asked less than neighbours agreed a few years ago.
The paradox can be confusing. Surely property companies should be City darlings rather than a minor sideline? And why should occupiers be so unhappy that they have asked the Government to intervene?
Commercial property investment has long been the poor relation of shares and gilts. But a combination of the stock market crash and plunging interest rates has turned this on its head. In the past, investors would pile in when rents were soaring. Now they are happy they can borrow so cheaply that profits come in even when rents are stable. Returns are far outstripping other assets.
Big developers are reaping few rewards, however, because building has been in the doldrums since the dot.com crash and the post-9/11 global downturn. Some are clearing out old stock, but the main beneficiaries are pension funds and insurance companies, which sold about £1.5 billion of buildings last year. That is ironic, as they have bought the lion's share of property for decades and still own the vast majority of Britain's business accommodation.
But something had to fill the hole left by decimated equity holdings and raise liquidity levels to meet a tougher new minimum.
They are having little trouble unloading on to a ravening pack of foreign and private buyers. German funds alone bought almost £3 billion worth last year, according to DTZ Research, with Middle East and French buyers not far behind. Meanwhile, private investors have gobbled up about £10.5 billion worth in the past three years, says consultant Lambert Smith Hampton. Some of these figures overlap: for instance, the £1.5 billion flowing in from Ireland has come from private buyers.
Foreigners like the high yields of 5%-9%, particularly as they are linked to uniquely long leases with upward-only rent reviews. Private buyers are entranced by the yield advantage over equities, linked to the fact that they can borrow at interest rates well below returns.
An extra boost has come from property trusts and partnerships set up over recent years to reduce tax burdens, but this is only a taste of the potential boom to come when property investment funds (PIF), new vehicles proposed in the Budget, are launched. According to FPDSavills, these could prove attractive to smaller investors, who have poured £40 billion into housing over the past eight years and are now looking for a move into commercial property. This could also be the last straw for traditional public property companies. Many have gone private and even the biggest are considering relaunching as PIFs.
Yet the key factors that make UK property so attractive are under threat.
Occupiers have persuaded the Government to consider banning the rule that rents should always rise after the traditional five-year review. And landlords are being forced to offer much shorter leases.
This illustrates a fundamental flaw in the sector, where the product has been driven by the manufacturer rather than the consumer. Top commercial property is built to 'institutional standards', covering factors such as floor sizes and air conditioning, which restrict choice and raise tenant costs.
But change is happening. Developers such as Peter Kershaw are finding ways to match demand. He has been involved in some of the world's biggest developments, such as London's Broadgate and Asia's massive Petronas Towers, but now heads HQ, one of Europe's leading suppliers of serviced offices.
These offer fully fitted space for short periods of time, and are likely to grow into a major slice of the sector. 'Modern business methods mean occupiers need the flexibility to move in and out of premises quickly,' he says.
Reformers are shifting the balance to occupiers by demanding better buildings.
'It doesn't matter how much money a development makes. If it doesn't work, then it is a failure,' says Richard Kauntze, chief executive of the British Council for Offices (BCO), a pressure group of developers, architects and occupiers.
BCO pressure to force buildings to match occupier needs means recent developments are greener and cheaper to run - a critical fact when leases dump most costs on to tenants. But Kauntze admits there is still a long way to go and research shows that occupiers still feel they are getting poor service. Making workplaces more amenable to staff is critical. 'After all, they make up 85% of business costs.'
Giant 'institutional standard' floors may be sacrificed, as studies show access to daylight raises staff morale and productivity. In Germany, no-one can be seated away from a window, and enlightened investors fear similar intrusive regulations could follow in the UK unless the industry changes its spots.
TOP UK PUBLIC PROPERTY COMPANIES
Market value Net assets
(pounds m) (pounds m)
1 Land Securities 5,058 1,124
2 British Land 3,071 794
3 Liberty International 2,372 822
4 Slough Estates 1,889 447
5 Hammerson 1,835 749
TOTAL UK SECTOR 22,494
SOURCE: MERRILL LYNCH, APRIL 2004.
THE PROPERTY BUSINESS IN EUROPE
(SIZE OF SECTOR, EURO M)
SOURCE: MERRILL LYNCH
PROPERTY IN THE UK REGIONAL OFFICE RENTS (pounds /SQ FT/YR)
Q3 2002 Q3 2003
M4 Corridor 30.87 29.21
Scotland 23.17 22.67
M25 South-west 22.57 21.80
North West 19.38 20.50
M25 North-west 20.61 19.97
North East 17.17 18.50
Midlands 17.13 17.38
South West 16.00 16.80
East Anglia 15.25 13.13
SOURCE: JONES LANG LASALLE.
REGIONAL RETAIL RENTS - ZONE A (pounds /SQ FT/YR)
Q3 2002 Q3 2003
Central London 469.00 473.00
North West 203.57 210.00
South East 200.56 204.17
Scotland 193.33 200.00
East Anglia 183.00 183.00
Midlands 179.00 180.00
North East 180.56 181.78
South West & Wales 169.44 169.44
SOURCE: JONES LANG LASALLE.
SAFE AS HOUSES?
RETURN ON CAPITAL INVESTED IN PROPERTY, EQUITIES AND GILTS (%)
Property Equities Gilts
July 2000 13.7 7.0 6.1
July 2001 7.9 -10.9 6.7
July 2002 8.9 -20.8 7.4
July 2003 10.3 3.4 7.0
Jan 2004 11.4 31.6 0.6
SOURCE: INVESTMENT PROPERTY DATABANK/KING STURGE
INVESTMENT RETURNS ON COMMERCIAL PROPERTY
TOTAL RETURN ON CAPITAL INVESTED (%)
Retail Central London 10.8
Rest of London 16.6
Southern England 15.4
Rest of UK 14.9
Shopping centres 15.5
Retail warehouses 16.4
Central London 0.9
Rest of London 3.4
Southern England 4.6
Rest of UK 11.4
Office parks 2.2
Southern England 10.2
Rest of UK 12.8
Distr warehouses 10.8
SOURCE: INVESTMENT PROPERTY DATABANK.
AVERAGE LEASE LENGTHS (YRS)
SOURCE: BRITISH PROPERTY FEDERATION/INVESTMENT PROPERTY DATABANK ANNUAL