London offices have been available at staggeringly low rents, over the past two years, but I detect signs that the London office market is changing, as the economy begins to recover.
A benefit of the recession has been that tenants have been able to lease office space in London at historically low rents and some of the most startling financial deals have been done on short term office lettings.
Conventional wisdom in the West End office market holds that Short Term office space (i.e. fag end leases for 1 or 2 years) are very hard to dispose of and therefore landlords (or tenants needing to sublet their space) will slash their rental terms accordingly.
I know of office space in St James’s St, SW1 which was offered at NIL rent, if a tenant was prepared to accept responsibility for business rates and service charge.
Above mentioned wisdom still holds true, but things are changing as the West End office market rallies:
- Short term office space in London is letting fast and fewer opportunities remain
- We inspected a cracking 3,000 sq ft penthouse office suite in St James’s where the rent was reduced to only £19.50 per sq ft! Unfortunately, we were one of 5 inspections that day
- Rather than allow tenants to sublet for a pittance, landlords are beginning to negotiate to take the office space back themselves, in order to refurbish it and re-offer to the market at a much higher rent.
As the supply of short term office leases dries up and the London economy rebounds from this mother of all recessions, I predict the day will return when landlords get away with letting office space for 5, 10 or even 15 years without break again. This is great for the valuation of their buildings, but a real pain in the toosik for tenants.
Luckily, this is some time off and in the meantime, customers of FindaLondonOffice are still successfully negotiating tenant only break options.