The latest quarterly update to our London office space rental guide is now live.
As predicted, London office rents have continued to rise across most central London areas in the 2nd quarter of 2014, as economic growth and business confidence gathers pace.
Mayfair and St James’s rent is comparatively static
In our analysis, we’ve noted that West End core areas Mayfair and St James’s have remained almost static. As Michael Fraser wrote recently, other costs of occupation in the core – in particular very high and rising business rates – have pushed demand into more affordable areas and partially arrested rental growth in Mayfair and St James’s at least for the time being.
As businesses look for a better deal outside the West End core, higher demand led to continued office rental growth, perhaps most pronounced in relatively lower cost areas such as Silicon Roundabout, Waterloo & Southwark, Clerkenwell & Midtown.
Demand for office space is outstripping supply across London
Of course rent rises are a symptom of rising demand and falling supply. Just 6 months ago we were able to show potential office tenants up to 10 matching properties for highly focused searches in these areas, but now supply has dried up. A similar search now produces a mere handful of suitable, available offices. And of course there are more and more businesses looking for and therefore in competition for the same space.
Is it still possible to find office space when supply is increasingly restricted?
Despite these challenges, we have been able to satisfy all our clients office space requirements so far this year, often at rental levels a touch below prevailing market rates. Because we have access to office space before it actively goes on the market, Find a London Office clients are often able to snap up an office ahead of their competion – sometimes up to month before it would actively go to market.
If you are searching for office space when it is in such short supply, being several steps of your competition is a key advantage.
Recently we have found a fantastic Grade A Warehouse building at 47 Neal St, Covent Garden, which new media advertising agency clients have just taken at an annual rent of £57.50 per ft2. This air conditioned space on 3 floors also has a large balcony at 3rd floor level.
Another client has just signed on similar quality office space on a single floor in Laystall St Clerkenwell at a rent of £42.50 per ft2. This Grade A Warehouse spec office also has outside space. The office interior has exposed ceilings with suspended lights, providing lots of light and volume.
Will London office rent continue to rise?
Yes. While current economic conditions and prevail and business confidence continues to improve, I expect office rent to continue rising across London in the immediate future – in the second half of this year – as the gap between demand and supply widens. And while that continues to be the case, finding the right space for our clients – at the right price – will become all the more challenging, requiring ingenuity, persistence, combined with canny negotiation skills. As you can probably imagine, this is keeping us pretty busy!