Mayfair v St James's 3rd June 2013

Mayfair average rents have been on the wane in recent quarters, slipping below neighbouring St. James’s, according to a review of the West End’s office submarkets by PPR, a CoStar company.



Mark Stansfield, senior real estate analyst at PPR, writes: “Rents in Mayfair stalled as they got too high relative to demand in a subdued economic climate with rising vacancies. However, it’s not necessarily time to exit Berkeley Square.



"Instead, we forecast a healthy recovery in Mayfair over the next five years on account of further office-to-residential conversions, improving demand, and expectations that this submarket will remain the hedge funds’ destination of choice in Central London.” Mayfair’s recent rental slide is not symbolic of all submarkets in the West End, highlighting Stansfield says, the importance of such granularity when making investment decisions. “Knightsbridge, Marylebone, and Soho in particular have all performed strongly in the last 12 months, for varying reasons - very low vacancy in Knightsbridge, high demand for the new space coming on stream in



Marylebone, and Soho’s continuing popularity with TMT firms - with positive implications for NOI growth in each,” Stansfield adds. “Conversely, investors should be wary of the potential for oversupply in Victoria in the next few years, and of further government exits in Westminster.

 

ndeed, with much variety on offer in the West End, and pricing expected to remain tight over the forecast, rental income will be all-important for driving performance. So for investors seeking to place capital in the West End – and elsewhere in London – PPR’s submarket rental forecasts should be of increasing interest.”