by Adrian Turner
Pick up any two West End agents, shake them together and ask them to agree the main source of inquiries for space in their market segment, and you will get no straight answer. Prominent would be the influence of the banking and financial companies pre- and immediately post-Big Bang in 1986 and through 1987 until the stock market crash. Perhaps as well known would be the influence of Government and quasi-Government take-up of space in SW1, which has run apace in 1987 and 1988. Beyond that, what other conclusions can be drawn from the evidence?
Traditionally it was possible to split the West End into well-defined local markets — Mayfair, St James’s, Victoria, Soho, Covent Garden — and in each case a clear pattern of occupier could be found. These boundaries are becoming increasingly blurred. Let us look at the reasons for this and some of the main changes which have occurred.
A key factor contributing to their development is undoubtedly the huge revolution in communications which has taken place over the last decade. It has enabled companies to link individuals and whole sections of their business by direct line, computer network, fax or even satellite. In our own world we know that the telex, a must for every office only two short years ago, is now struggling to justify the floorspace it occupies. In its place is an array of terminals providing information from an infinite variety of sources and locations far detached from our offices.
No longer is it necessary for many companies to be located in their traditional areas of London, and tenants today are inevitably more footloose and versatile in their location requirements.
The situation has been further accentuated by other market forces. The deregulation of the City and the unprecedented demand for space at that time brought about a shortage of suitable accommodation and forced some companies to consider locations which might not previously have been contemplated. Saloman Brothers’ much-quoted move to Victoria is a prime example, and others have followed. The City market has now recovered more of an equilibrium and it is the West End which in the last year has itself suffered from lack of available space. Prospective tenants have been forced to consider buildings on the basis of availability and suitability. Location has had to take second place to other criteria. Thus we have seen a major advertising agency move to Berkeley Square, a major department store move to Victoria and Japanese companies relocating to the traditional British heartland in St James’s.
Other factors assisting in this more universal market and contributing to the change in certain areas have been the relaxation of planning controls by the introduction of the B1 planning use, the successful campaign to clean up and improve parts of Soho, and the settlement of the outstanding arguments over how much office space in Mayfair might be returned to residential use in 1990.
On examining the specific areas, various trends emerge from the statistics as illustrated in the attached graph. A key feature is the significant increase in the take-up by industrial and manufacturing companies, particularly in SW1, which undoubtedly reflects continued confidence in the strength of the economy. Another noticeable feature is the increase in all areas of take-up by professional firms, demonstrating the continuing growth of service industries and, in my view, the increasing awareness of many professional firms for a better standard of accommodation. This has been brought about by the relaxation, principally by the legal profession, of the rules relating to promotion, which in turn has led to an enhanced awareness of the image that property can project and thus to the need for better, more flexible accommodation, and enhanced staff facilities.
Soho was traditionally the territory of the media and film industries, but recent planning policies and the clean-up campaign have attracted a variety of tenants as demonstrated in the letting of several successful schemes in Soho Square.
Victoria, once oil alley, now has a wide base of tenant mix.
One landmark building alone illustrates the full extent of the changes which have taken place. Until comparatively recently, Portland House was occupied predominantly by Blue Circle Industries and Phillips Petroleum. Since then the tenant mix has included, among others, the legal profession, an American bank, an international airline, engineers, a life insurance company and a German publishing company.
Other areas, too, have seen changes. The area north of Oxford Street, once the province of the medical profession, has become the home for many leading firms of surveyors as well as a number of financial and commercial companies.
Mayfair itself remains perhaps the more broadly based in its tenant mix. It will be interesting over the next year to 18 months to see whether the spreading of interest across traditional boundaries is maintained or whether, with the increasing availability of space as more new developments come on stream, companies revert to their traditional stamping grounds. It is my view that the market has opened up for the better and that the spread of users will continue, not least because I believe that the property profession itself now takes a broader perspective in terms of advice given. Traditional boundaries have broken down and a client looking for new accommodation may look as readily in Holborn as in Victoria, and as readily in Mayfair as in Covent Garden.
More significant in the months to come will be factors of availability, standard of accommodation and total outgoings.
Much has been written on the former two, but few companies have assessed in depth the overall effect of a rent review, perhaps last settled in 1985, combined with the new rating assessments which, in some central areas, will produce enormous increases in the occupiers’ total budget. This must enhance the attractiveness of some locations traditionally regarded as fringe, including parts of Camden such as Bloomsbury and King’s Cross.
Another trend which I have noticed is the significant increase in the number of inquiries from overseas companies, in particular European ones. A prime example is a building on New Bond Street, recently acquired as a whole by my firm on behalf of a Danish finance company, which has been partly sublet to two tenants, one Japanes and the other Scandinavian. If London is to be the financial centre of Europe, which many believe it can and should be, then this trend must continue.
There have been considerable changes in recent years and one may expect to see these trends continue with the breaking down of traditional areas and the establishment of a more universal office market throughout the whole of central London.
