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Since the recession, new developments have been few and far between. The limited new supply will only really start to affect the market in a year or two’s time once the developments are completed. This lack of supply is accentuated by a huge demand for office space in both the West End and City which in turn is pushing up rental prices. A perfect example of this in St. James and Mayfair where available space is very low and there are no significant developments in the pipeline; Rhodri Mason at Morgan Pryce states that, “rents in St James regularly achieve £100 psf with the highest being around £130 psf which is almost back to pre-recession levels.”
Over the last 10 years there have been significant changes in what businesses want from their office space. According to research done by BPF/IPD in 2013 the average lease length has shortened with over 80% of new leases in 2012 being between 1 and 5 years in length meaning the average lease length is 5.8 years – the lowest ever recorded. Similarly the average amount of time to a Central London occupiers’ first break is just under 4.4 years. This reduction in lease length allows occupiers to change building and location more often than in past years, which is good news for Morgan Pryce being office acquisition agents.
Since the dot-com boom in the 1990’s “mega occupiers,” have become a thing of the past. New developments expect an occupancy ratio of around 1:8 sq. m which is down from 1:15 sq. m ten years ago. Of course there are exceptions to this trend as Google has recently moved into 1 million sq. ft. at Kings Cross.
The traditional sub market divides are becoming less segregated, this is due to this huge demand and lack of supply which in turn is pushing up rents, and therefore businesses cannot be so picky with their location. Ten years ago there were clear divides, Lawyers in Midtown, Finance in the City, and Hedge-funds in Mayfair, however this segregation is become more diluted with many types of small businesses cropping up all over the City and 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.