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The West End office market is now well and truly feeling the pinch and analysts are suggesting it could be the case for up to three years with a current demand of 3 million square feet of space. Over the past 12 months, the market has increasingly got tighter and tighter for available office space and has seen rents start to climb back towards the highs of 2007. This is certainly the case for parts of Mayfair and St. James’s with rents achieving £130 per square foot and consistently around the £100 mark.
Analysts are suggesting that over the next 3 years demand will outweigh supply by almost 50%, with 3million square foot of demand against 1.6 million of available supply. Alex Goode from Morgan Pryce believes this is down to two main reasons; ‘’ Firstly the lack of supply and new developments, pre-recession, there was a huge excess of supply with developers flooding the market trying to keep up with the driving supply. However, once the market crashed and supply fell off a cliff, there was still a huge amount of new developments, refurbished building and available space to cater the market over the next 3-4 years’’. This has now dried up and with developers are only just getting back into the market and trying to play catch up and we are subsequently feeling the pinch. Recent research suggests that the amount of space under construction is around 27% lower than the 10 year average.
Secondly is simply down to the sheer volume of occupiers in the market. With the country coming out of recession and confidence back in the air, banks are lending again and firms are looking to invest and trust the market again. 12 months ago, the TMT sector was single handily keeping the London office market afloat. However, 12 months later and it seems every sector is back with the financial side very much leading the way.
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.