Office rental growth is driving development activity in London, with supply shortage expected to further this in 2011

Property returns for the office sector in Q4, including capital growth and rental income, grew to 2.7%, according to latest Jones Lang LaSalle quarterly index.

The index showed that capital value growth alone was at 1.2%.

Average rental growth for all property remained at -0.2%, but the office sector recorded quarterly growth at 0.5%, rental growth that is underpinning the development activity in London.

Supply shortage in London, rather than tenant demand, is expected to drive further growth in 2011.

Overall UK property returns slowed to 2.2% in Q4, down from 2.4% in Q3. Capital value growth remained at 0.9%, as all sectors improved in December. Annual capital growth stood at 8.4%.

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