West end office latest 18th December 2012

Despite shrinking total returns, the West End remains ring fenced by the continued supply-demand imbalance which is intensifying competition for prime stock, according to Cluttons’ winter 2012 West End Office Update.


Occupier demand remains below the long term average as businesses sit tight unless relocating to cut costs, the report finds, however a shift in dynamics is seeing continued growth amongst selective tenant groups.

Demand for creative working environments is placing some upwards pressure on office rents, especially in the markets of Noho, Marylebone, Soho, and Covent Garden where tenants seek collaborative workspaces with a sense of affordability when compared to that on offer in Mayfair and St James’s. That said, the focus continues to draw on a narrowing band of assets. A similar scenario is unfolding in the investment market.

Headline dominant overseas investors and UK REITs are scouring the market for opportunities, with the number of residential conversion applications continuing to attract while 30% plus capital value premiums are on offer.

The limited supply pipeline will inevitably drive landlords to refurbish poorer quality assets; however with development finance likely to remain restricted in the near term the time lag for delivery of stock is being drawn out.

This is likely to further limit tenant options when it comes to relocation and prompt demand for pre-lets as top quality space in sought after locations continues to attract those in the top occupier band.