Blink And It’s Leased: West End Office Leasing Market Accelerates
Is the London West End office market speeding up?
According to internal numbers produced for BNP Paribas Real Estate, it looks like it might be. The acceleration, if it is an acceleration, comes as occupiers commit to leases in double-quick time.
The make-up-your-mind-quickly spur for occupiers is a chronic shortage of the kind of high-profile, grade-A floorspace they need to help project their brand.
BNP Paribas Real Estate’s internal West End office data revealed the rate of deals to number of inspections increased by 40% in H2 2022 versus H1 2019. The speed of space let has increased by 25%.
“The speed of leasing stat is taken from our own West End office’s data and is reflective of that office only. It’s something we’ve been picking up for a while as a trend,” BNP Paribas Real Estate said in a statement to Bisnow.
But the figures are not unalloyed good news: What seems to be happening is that the number of viewings is down, but the volume of space let is up — the first by 60%, the second by 25%. That translates into somewhat more deals activity off the back of somewhat less occupier interest.
According to the firm’s first public data crunch of the spring quarter, Q2 2022 saw a 62% increase in office demand, with take-up reaching 1.21M SF across 164 deals in total, with banking and finance accounting for 36%, media and tech 15%, and professional services 16%.
As much as 52% of take-up in Q2 landed in grade-A space, pushing down the grade-A vacancy to 1.73%. West End supply is down 11%, the firm said. The total vacancy rate across all grades is 5.3%.
Unsurprisingly, the urge to do deals has caused a surge in West End rents. In Mayfair and St James rents are up 8.33% from Q1 2021 to Q2 2022. The West End prime rent was £130 per SF in Q2 2022.
BNP Paribas Real Estate Head of West End Agency Simon Knights said occupiers' anxiety to nab the right floorspace quickly showed that West End visibility and branding now trumped other concerns in the hunt for a suitable public-facing office.
“The individualism of occupiers is really important — they care about their employees’ quality of life and the perception of their brand, of which the office is a reflection," he said. "This is fuelling the migration and competition from many occupiers to secure top specified office buildings, making this market extremely hot right now."
If Knights is right, then the increased velocity of the West End market is unlikely to spread very far: only the most brand-friendly buildings and locations will attract this kind of speed-dating attention.
