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West End retains its position as London hotspot for office space
Creative industries primary factor behind West End resilience
Article posted: 12 Aug 2011
According to the latest Central London Offices report from CB Richard Ellis, take up of office space in Central London fell to 2.2m sq ft in Q2 as leasing activity remained subdued. This represented a slight decline on the previous quarter and was 26% below the long-term average. However, office space in the West End bucked this wider trend as take-up rose 18% over the quarter to reach an above trend 1.2m sq ft.
Demand for new space from the creative industries was the primary factor behind the West End’s resilience. Deals involving Google, Double Negative and MPG were all completed during the quarter which was a continuation of a trend that began early last year.
The West End has now experienced seven successive quarters of trend or above trend take-up, which has pushed supply levels to 3.9m sq ft – its lowest level since Q1 2008 and only 1.1m sq ft higher than the low point of the last cycle. This has taken the West End vacancy rate to a recent low of 3.8%.
Phillip Howells, Executive Director, West End Business Team, CB Richard Ellis, said: “Creative industries occupiers have played a significant role in supporting West End leasing activity in the second quarter, and over much of the last year, particularly in locations outside of Mayfair and St James’s.”
Other Central London markets also have seen sharp falls in supply and the vacancy rate, with the vacancy rate for office space on the Southbank at a low point of 2.1%, which compares with a low point of 2.0% during the last cycle.
The new report also notes that the supply squeeze is set to continue with new development completions on track to be one of the lowest on record for Central London, with only 1.9m sq ft scheduled for completion this year. The pipeline for office space in the City of London is expected to deliver only 1.2m sq ft and the West End only 436,200 sq ft – making it the lowest annual completion rate ever recorded.
The new report shows that rental growth has stalled in the main Central London markets, prime rents were unchanged across all the Central London markets with City and West End staying at £55.00 per sq ft and £92.50 per sq ft respectively. Although prime rents rose in some of the West End submarkets: Prime rents for office space in Soho rose by £2.50 per sq ft to £55.00 per sq ft and prime rents in the North of Oxford Street East and North of Oxford Street West markets rose by the same amount to £52.50 per sq ft and £62.50 per sq ft respectively.
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