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Mayfair is the most prestigious area in Central London for major corporations and blue chip organisations that are looking for office space. The highest rental rates in Central London belong to Mayfair office space, particularly around Berkeley Square and Hanover Square. Offices in Mayfair vary from building to building in terms of style but are generally typical of London’s upmarket office space. Mayfair office rents start at £45 per square foot and can reach as high as £110 per square foot for the most iconic buildings.
Demonstrating this is the news that the top floor of the 23 Savile Row building has just been let for £110 per square foot. This comes as a reminder of the ongoing popularity and the exclusivity of the Mayfair and St James’s office market. The letting of this top floor is the most expensive office leasing deal signed this year in Europe. The tenant is a German hedge fund manager, Sapinda. “It is easy to see why rents in Mayfair could become so high in such prestigious locations,” says Sally Brough, Associate Director at Morgan Pryce, “especially if landlords are prepared to accept shorter leases and agree to terms on a floor by floor basis”.
The popularity of offices in Mayfair and St James’s is highlighted by the fact that this deal took place against the background of the Eurozone crisis. The low vacancy rate of 5.7% in Mayfair and St James’s suggests that the demand arising from the financial sector far outweighs the impact of the difficult economic climate, generating rental growth for prestige offices.
£100-per-square-foot rents on the rise
This isn’t the only rent over £100 per square foot in the area. The second floor at 1 Grafton Street is currently under offer for a rent of more than £100 per square foot. Not since the autumn of 2008 have we seen a number of deals over the £100 mark: between the spring of 2006 and the autumn of 2008, 56 deals were signed for rent which cost the tenants over £100 per square foot. These deals disappeared during the financial crash; however, in the past year there have been seven deals over the £100-per-square-foot threshold. The deals have mostly been for relatively small units of space (ranging from 1,400 square feet to 8,900 square feet). However, when £100-plus rents first emerged in 2006 they also were seen initially in small-unit rents, and then progressed onto larger transactions.
But what about the effect of a possible Eurozone break-up? The prices for Mayfair and St James’s offices have jumped 42% since 2009 while the vacancy rate has halved since its peak at 11.3% three years ago. If the worst happened, John Eden from Morgan Pryce believes that ”while Mayfair would not defy gravity, this office market would be among the most resilient, given its tight supply conditions and the raft of fund managers and private equity firms that seem firmly wedded to its exclusive addresses.”
Morgan Pryce is 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 the tenant.