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Offices in the West End are now more expensive to lease than those in Hong Kong. Morgan Pryce, the London office agent, has observed that current top-end rents for offices in Mayfair can reach over £95 per square foot and around £75 in Knightsbridge.
Occupancy costs for Grade-A space in Hong Kong have dropped by 12% according to a DTZ report. The drop is thought to have been as a result of tenants wanting – or needing – to scale down in the current and more unpredictable financial climate.
It turns out that West End offices have reclaimed their title of being the most expensive because they have escaped the effect of any such scaling down by London-based companies. Office rents have remained relatively consistent in the likes of Mayfair and Knightsbridge as demand remains healthy in such desirable locations.
“It is unlikely we will see a drop in rents within the West End as has been seen in Hong Kong,” says Eugene O’Sullivan, director at Morgan Pryce. “Due to a lack of development in the West End the supply there just fails to meet demand, thus maintaining high rents. A significant percentage of office space in the West End is in listed buildings and protected areas. This seriously limits the amount of development that can occur.”
Offices in Mayfair, the area that tends to have the highest rents within the West End, are highly sought after as they have prestigious addresses. And these addresses will continue to be in demand as they will continue to remain a limited resource.
A CBRE market report highlighted that an increasing number of job cuts in 2011 and 2012 was having a direct impact on the office market, causing vacancy to increase within Hong Kong. If too many companies need to scale down and move to less central parts of Hong Kong with cheaper rents, the entire office market will be affected. This problem would be compounded if it coincided with the completion of new space in the city, such as the CCB Tower in Hong Kong’s central district.
Back in the UK, specifically the West End and offices in Mayfair in particular, limited space combined with high development restrictions mean that Hong Kong’s problems are unlikely to be replicated here. With expected persistent high demand, it is likely that the West End will maintain high its high rents.
Morgan Pryce is 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.