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There is a lot of excitement surrounding the completion of Crossrail in 2018/2019, not just because we will no longer be packed like sardines on the Central Line but because it will have a huge effect on the supply and demand of office space in London. As tenant representation agents we see every day how the lack of supply and high rents are having a detrimental effect on businesses; they simply cannot pay the rents being asked so are being forced out of London, extending leases or taking short term space.
Crossrail is not likely to create new office markets in Central London due to the strength of existing groupings and submarkets but there will be many businesses who are tempted by reduced rents outside of Central London who will look to relocate to new locations such as Slough, where it would be possible to get to the West End in 20 minutes. This relocation is likely to push up rents in these areas and will create new markets outside London.
To make matters worse on April 1st 2017 across the UK all business rates are being revalued with areas that have seen the most rental growth will be hit hardest. The 2015 revaluation was delayed by the Government allowing an extra two years of rental growth. This means that assessments following the 2017 revaluation will be higher than they should have been and at similar levels to the top of the market in 2007. According to BNP Paribas the increase in rates liability in King’s Cross could be as high as 79% and office towers in the City and SE1 could see increases of up to 50%. Other areas that are likely to see a large increase are Hammersmith (+19%), Paddington (+16%) St James’s (+10%), Victoria (+7%), and the Docklands (+6%).
Ollie Salter a surveyor at Morgan Pryce believes, “the combined effect of the completion of Crossrail, emergence of new business districts and the 2017 business rates revaluation will create a hugely positive change for businesses looking to lease office space in and close to London, finally putting a cap on the astronomical rents we are currently seeing.”
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.