The West End Office Market
West End Take Up Falls 52% During 2008
In early 2008, demand for West End office space proved relatively resilient as it was hoped the effects of the banking crisis would be limited to the main financial district. However, by year end, the West End market was feeling the full effects of the economic downturn and total take up in 2008 was 2.7 million sq ft, the lowest in 4 years with average deal sizes falling from 3,576 sq ft in 2007 to 3,000 sq ft in 2008. The largest deals in 2008 included 70,050 sq ft at 20 Manchester Square, 46,169 sq ft at 28 King Street and 37,700 sq ft at 55 Baker Street, all of which took place in the first half of the year. In the second half of the year only 1.4 million sq ft was leased and in Quarter 4 only 373,548 sq ft was leased compared with 1.3 million sq ft for the same period last year, implying the worst is yet to come.
Total available space currently stands at 5.8 million sq ft; levels last seen in 2005. New/refurbished space is at 1.8 million sq ft and second-hand space levels are at 2.7 million sq ft. The largest single available spaces include Ashdown House, Victoria Street, 1a Page Street and 1 Drummond Gate. Only the latter has a quoting rent, which is currently at £45.00 per sq ft.
One bright spot on the horizon is that the current supply in the West End is not being exacerbated by the development pipeline. There is currently only 350,000 sq ft under construction and due to be delivered in 2009. The most significant being 23 Savile Row at 96,214 sq ft and The Peak on Wilton Road in Victoria at 78,029 sq ft. Planning permission has been granted for a further 600,000 sq ft although none of this potential space has yet broken ground. The impact of the economic downturn is now being felt across the West End. In particular, the high profile Hedge Funds which have been largely responsible for driving prime rents in the West End to unsustainable levels, have now all but disappeared from the market.
