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Souring office rents are forcing tenants to look more creatively at their office space needs according to Carter Jonas’ quarterly review of the market. With costs rising in nine London submarkets and likely to do so until at least 2017, many sectors are looking to reduce their footprint in order to save on rental costs.
Some of the decisions being made include introducing more flexible working, with staff working remotely, as well as hot-desking, and even moving the entire office to cheaper peripheral areas.
The high demand in certain areas coupled with lack of supply have led to intense rental conditions, with West End Mayfair/St James’s rents, rates, and service charge costs having risen by up to 16% to as much as £217 per square foot since this time last year. Once the many buildings currently under construction, or shortly to be commenced, have been completed it is believed that the pressure will be relieved; until then companies, particularly legal, media and business services as noted by Carter Jonas, are seeking ways to avoid the rocketing rental costs.
The occupancy costs for offices in the City have also increased significantly, up 11% to up to £108 per square foot, while the Docklands is up 13% since 2013. In the eastern fringe, once unfashionable but now very much in demand, rents have increased as much as 40% since 2013, with no reduction in demand for office space here. Tenants who contracted here some years ago and who are facing lease and rent renewals will be particularly hard hit by the increase in market rent, and many will be forced to look elsewhere.
In contrast, cheaper second-hand but refurbished offices can be found for £40 per square foot, although it is possible that even these will be reduced in number until supply increases in the coming years.
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.