COMMENT The West End office market has been under a microscope for the past few years. Occupiers continue their search for the best new schemes, looking for today’s new version of grade-A space in prime locations. But with low vacancy rates of that sought-after stock, and the development viability challenges preventing repositioning and refurbishment of older assets, the demand is rapidly outweighing supply.
So where do occupiers go when they need space in the West End in locations that have good transport links, meet their organisation’s sustainability criteria, provide amenities that their employees expect and have large enough floorplates to accommodate all their staff?
The answer is that they can remain in the West End but accept that the area is undergoing change and expansion – resulting in the core area of Mayfair extending northwards to include Oxford Street.
Shopping for a deal
With around 1.1m sq ft due for completion on Oxford Street between now and 2026, and with the opening of the Elizabeth Line, this globally recognised retail pitch is rapidly evolving to be a credible office pitch in its own right.
So far this year there have already been six prelets out of 21 for the West End as a whole, totalling 86,616 sq ft in this area. In the same period last year there were zero. Four of this year’s prelets took place at 65 Davies Street, which is now fully prelet. The other two took place in the Burlian at 80 New Bond Street, where the two remaining floors are both under offer.
As the expansion of the core West End market takes hold, among the net beneficiaries are the former department stores that have fallen victim to the retail revolution. The former flagship Debenhams store, as well as House of Fraser, are testament to this trend, and are going through their respective transformations to produce major new retail and office schemes.
Headline rents of up to £165 per sq ft are being talked about for Debenhams, which would have been unthinkable two years ago. This goes to show that occupiers who would previously overlook Oxford Street are wising up to the benefits of buildings offering larger floorplates, developed with everything else you would expect from a grade-A scheme.
New frontier
The recent Marks & Spencer planning decision has divided opinion, with the secretary of state refusing planning permission despite Westminster City Council and the Greater London Authority’s approval to demolish its current building at 458 Oxford Street and replace it with a new retail and office scheme. Nonetheless, the very idea of the proposal is testament to how offices in this location are seen as the new frontier in the core West End market.
It will be interesting to see what happens with Marks & Spencer, as well as where the Oxford Street regeneration goes in terms of attracting office occupiers from across central London and beyond. London’s West End will always maintain its prestige and allure, and the emergence of the Oxford Street office sub-market is set well to be accepted by occupiers in search of prime office space.
Jonathan Gardiner is head of central London office agency at Savills
