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Strong demand for short-term office space in London in classic hedge fund destinations

A couple of months ago, I noted that we have detected strong demand for short term office lets (i.e. “fag end” leases on office space available for just 1 – 2 years certain)  in classic hedge fund destinations such as Mayfair and St James’s.

We have subsequently noted more evidence of this trend. We have even recently experienced instances of gazzumping, where parties continue to compete for short term office space, when a contract has already been sent out to another party.

Not a scientific study, but this suggests a few things to me:

  1. Hedge funds love a cheap deal! Short term space in London is traditionally relatively cheap, as most companies prefer to invest the cost and time involved in an office move to acquiring a more permanent address.
  2. Some alternative investment funds are opting for short term space, so if UK plc becomes more regulated and hikes up taxes further, they have the flexibility to leave for a more profitable business environment (and I suspect a quieter social life) on the shores of Lake Geneva.
  3. If demand persists for short term lets, as it did in the “dot com boom”, the graph could once again flip to reveal an inverse relationship between rent and brevity of term.

P.S. I have nothing per se against Geneva / Switzerland. Their tax system for the rich seems pretty compelling and I love “la cheese fondue”!

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