West end office update 26th March 2012

The West End office market, while continuing to feel the burden of economic uncertainty, saw a sharp upturn in letting activity in Q4 which has persisted into the early months of 2012.

Business costs remain high on the agenda: this has been the catalyst for greater flexibility in terms of location. 'Cool Crescent' markets such as Soho, Covent Garden and Noho/ Fitzrovia are attracting a range of occupiers, including hedge funds and the active TMT sectors.

Subsequently, vacancy rates in these markets have been driven down to levels unseen in some cases since 2005 and rental growth has been generated outside of the prime Mayfair/St James's core. This said, prime the West End remains plagued by a severe supply shortage, something which will continue to underpin both rents and intense investor demand.

While debt finance from traditional sources has depleted in recent months, other funding routes have stepped in. Despite the fact that such properties are a rarefied commodity at the moment, there are plenty of cash buyers waiting in the wings to secure the assets that do come to the market.