West End resilience bucks wider London offices trend – CBRE
The vacancy rate for office space in the West End of London has reached a recent low of 3.8% as supply has fallen to 3.9m sq ft – the lowest level since Q1 2008 and only 1.1m sq ft above the low-point of the previous cycle, says CBRE. The firm’s research shows that demand for new space from the creative industries is a key factor driving the resilience of the West End market, which has bucked the wider trend for subdued leasing activity as take-up rose 18% during the second quarter to reach an above-trend 1.2m sq ft.
CBRE’s latest Central London Offices report shows that take-up across Central London fell to 2.2m sq ft during Q2 2011, which was 4% lower than in the previous quarter, and 26% below the long-term average. Phillip Howells, executive director in CBRE’s West End business team, 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.”
The firm notes that other Central London markets have also seen sharp declines in supply – the vacancy rate for the Southbank area fell to 2.1% during the quarter, compared with a low point of 2.0% during the previous cycle. CBRE also says that with new development completions expected to be among the lowest on record this year at only 1.9m sq ft for the Central London area, the supply squeeze is set to continue. Within this, the City pipeline is only expected to deliver 1.2m sq ft and the West End just 436,200 sq ft.
Rental growth has stalled in the main Central London markets, according to CBRE’s research, with prime rents for the City and West End staying at £55.00 per sq ft and £92.50 per sq ft respectively. There were pockets of rental increases, however, with Soho prime rents up £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 rising by the same amount to £52.50 per sq ft and £62.50 per sq ft respectively.
