UBS reaping gains from bet on London rent

London

WHEN UBS Group agreed to rent a new headquarters in London five years ago, the UK economy was struggling to emerge from a recession and the financial district's banks were firing workers following the global credit crisis. As the Swiss lender's building nears completion, its timing looks shrewd.

UBS secured a rent of £54.50 (S$110.43) per square foot (psf) in the City of London financial district's biggest leasing agreement since 2002. Since then, a rebounding financial industry has collided with a dearth of new offices, pushing average rents up to about £8 psf more than UBS will pay. Broker CBRE Group forecasts an increase of 12 per cent this year.

Demand for offices in the City is expected to outstrip supply for the next several years because construction plummeted after the financial crisis, creating a shortage of space coming onto the market today, according to Deloitte Real Estate. Just one building being completed this year has more than 100,000 sq ft that's still available to lease, said Chris…