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The central London office market, specifically the West End is the most expensive in the world, with Hong Kong a close second. The low supply and high demand of office space in London has pushed rents up, and tenants out, of central London.
Although new supply is in the pipeline we won’t see its affect for another year and a half to two years which means rents will remain high until then; the only saving grace is that incentives seem to be increasing which is occurring because landlords are realising people simply can’t pay without them. The effects of rents reaching £130 psf in Mayfair at 23 King Street and hitting a never seen before £85 psf in the City, in the 41st floor in 122 Leadenhall is that many people are moving out of the central London. According to Ollie Salter a survey at Morgan Pryce “just over 65% of all Morgan Pryce’s clients are trying to relocate outside the central London market because they can’t pay the rent. We consider a vacancy rate of under 5% to be damaging to the market and this is evident today. Vacancy rates in the West End were a shocking 3.8% a month or two ago.”
However, as more and more businesses move out of central London, the ripple effect is getting stronger – rents are creeping up in previously ‘cheap’ areas as the demand for offices out there is increasing. An example of this can be seen in Ealing Cross; a new grade A office Morgan Pryce acquired for a client last year had a quoting rent around the £25 psf mark, now just a year on the same space is commanding a rent of £35 psf – a staggering increase of £10 psf in one year! This ripple effect is going to push smaller companies who were once based in Central London further and further out potentially having a negative effect on their business, and reducing the diversity of businesses in London.
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.