ompetition for West End offices is soaring despite the growth of remote working as employers snap up the best space to help hold on to valued staff.
Demand for offices was up 62% in the second quarter of the year, according to new data from BNP Paribas Real Estate. There were 164 deals for 1.21 million sq ft with banking and finance, media and tech and professional services the most active sectors.
The speed at which space is let has accelerated by 25%, while 52% of the take-up has been for Grade A space, the report said.
The demand has started to drive prices with prime office rents in Mayfair and St James’s up 8% on last year. Average prime West End prime rents currently sit at £130 per sq ft.
Meanwhile supply in the West End has fallen by 11% largely because of the surge in uptake. Major occupiers who have committed to the West End include Christian Dior, BP, as well as investors Blackstone, Eastdil and Starwood.
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Why the Elizabeth line is great news for property buyersBNP said demand is being fuelled by the tight jobs market with occupiers seeking to offer the best working conditions as an recruitment incentive.
It said: “Physical vacancy is less important, and the office environment has taken on a more experiential role for the benefit of brand and consumers; employees, clients etc.”
Simon Knights, head of West End agency at BNP Paribas Real Estate. commented: “I am so bored of reading figures recording that return to the office physical occupancy is up, down, or whatever. Are all business sectors performing the same? Are all locations and buildings similar? Absolutely not, and our figures show there are so many more important discussions to be had rather than asking how full an office building is. The office sector is not toast, it has simply evolved beyond its existing primary function.”
“The individualism of occupiers is really important, of which the office is a reflection. This is fuelling the migration and competition from many occupiers to secure top specified office buildings, making this market extremely hot right now. We are certainly picking up on this more and more.”
Property experts also forecast a strong year for the residential rental market with agency Savills saying it expects average rents in central London to rise by a 12.0% in 2022, and by 18.3% over the five years to the end of 2026.
Savills research analyst Jessica Tomlinson said: “Prime rental values in London have been steadily recovering from Covid-19 related falls since the start of the year. In the three months to June, rental values increased by a further 3.3%, bringing annual growth to 13.5% — the highest annual increase recorded in over 20 years — which has more than compensated for the losses seen during the pandemic,”
