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Over the last 6-8 months, the West End office market has been getting noticeably tighter and tighter and the recent space Morgan Pryce acquired for a client in Soho really emphasised how tight the market really is.
Morgan Pryce was acting on behalf of a media/tech firm looking to acquire 1,500 -2,000 sq. ft. in the West End with a priority on focusing in Soho. This is a very standard requirement for Soho and as long as they are budget realistic, which they were, should be no problem at all. Unfortunately, the state of the West End market meant the search process took over a month as every building we short listed or took a closer look at would be under offer before we could get all the decision makers around. Finally, after a frustrating search process we were able to secure an option in the heart of Soho. This again was extremely frustrating as the landlord was able to dictate extremely landlord biased terms and were much tighter on incentives. However, Morgan Pryce did manage to secure the space and move through the legal process quickly to complete the deal in early January 2014.
So why is the market so tight if we are meant to be coming out of recession?
There are a number of reasons for this; firstly, before the decline in 2008 there was huge development works taking place with developers and investors piling millions into new schemes across the West End and when the market started to fall in 2008 this development dried up completely. In the years through the recession and up to mid-way through 2013 there was enough development already built to cover these years but now, as occupiers flood back into the market there has been no new development since 2008 and we are still trying to live off the scraps produced pre-recession which is now drying up. Developers have of course come back into the market over the last 6 months but unfortunately it will still be another 12 months before any new schemes or refurbished offices are brought to the market.
The second main reason for the state of the West End market is the competition. The last four quarters has seen more take up of office space in the West End than in the years 2008-2011combined, really indicating how confident the market is right now. With the increased numbers of potential occupiers and the poor supply side it has led to the market dropping below 5%for vacancy rates and meaning the next 8months will be very tough for occupiers looking to set up in the West End.
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.