Agencies warn Westminster office pipeline is ‘nowhere near’ demand
Westminster’s refusal to grant planning permission for an office redevelopment on Savile Row has drawn fresh attention to the dire state of the development pipeline in one of the capital’s most crucial business districts.
The council this week rejected the Pollen Estate’s plans to demolish and rebuild 18-20 Savile Row, W1, on sustainability grounds, arguing that the proposed scheme did not encourage circular economy practices in terms of its reuse of materials.
The estate has since hit back at councillors, commenting that the existing buildings “are inherently flawed; poorly built on a bomb site in the post-war period with inflexible floorplates, very low floor-to-ceiling heights, a raised ground floor and poor operational carbon credentials”.
Westminster’s refusal to grant planning permission for an office redevelopment on Savile Row has drawn fresh attention to the dire state of the development pipeline in one of the capital’s most crucial business districts.
The council this week rejected the Pollen Estate’s plans to demolish and rebuild 18-20 Savile Row, W1, on sustainability grounds, arguing that the proposed scheme did not encourage circular economy practices in terms of its reuse of materials.
The estate has since hit back at councillors, commenting that the existing buildings “are inherently flawed; poorly built on a bomb site in the post-war period with inflexible floorplates, very low floor-to-ceiling heights, a raised ground floor and poor operational carbon credentials”.
Lack of options
A report on the state of the Mayfair, St James’s and wider Westminster and West End core office market, prepared by Kontor, Knight Frank and Gerald Eve and lodged by the Pollen Estate shortly before this week’s committee meeting, makes clear just how few options office occupiers have in the area if they want to lease space of the right quality and quantity.
That lack of options, the three agencies noted, has led to big-name occupiers including Lazard, Apollo and Perella Weinberg leaving the West End core for other parts of London.
Lodged ahead of Westminster’s approval of an office-led redevelopment of the former Fenwick department store, the agencies’ report noted that no major office redevelopment had been signed off in the borough since October 2022. “The pipeline is, therefore, not being replenished, especially with either new-build or refurbishment/retrofit developments for which planning permission is required,” it said.
Flight to quality
The report added that there is “relatively little” floorspace in the planning pipeline and no offices larger than 60,000 sq ft available in the West End core. “The overall level at which space is currently being leased is well above the long-term average and driven by demand for the best-quality space,” the report said. “The forecast pipeline of space comes nowhere near close to meeting this long-term average.”
It added that near-term schemes including 33 Piccadilly and 1 Hanover Street are unlikely to be available in 2025 as once expected.
The vacancy rate in the West End core is 5.5%, the agencies said, 1.8 percentage points below the long-term average and beneath the 6.4% vacancy rate that the City Plan identifies as being too low.
Other occupiers to have left the West End core include law firm Forsters and the Economist Group, while firms leaving Westminster specifically include Tata Consultancy Services, McKinsey, Apple and Chubb.
“Central Westminster – Mayfair and St James’s – and the city [of Westminster] are already losing occupiers,” the report said. “This is expected to continue, because of the lack of available space. It is likely to exacerbate increasing rents and restrict the diversity of occupiers, which are already heavily focused on financial services.”
Catastrophic decline
The report’s findings echo a recent warning from the Westminster Property Association, which last week published a paper with Arup analysing the best- and worst-case scenarios over the coming decades for the borough’s economic growth under different approaches to planning policy.
That study found that Westminster has lost almost 4m sq ft of office space since 2019, and WPA chair and Landsec director Marcus Geddes said that in a worst-case scenario the borough could now face a “catastrophic decline in employment space that would threaten the West End’s status as a leading global business district”.
Philip Hobley, head of London offices at Knight Frank and a WPA board member, added: “The erosion of the property industry’s ability to provide best-in-class, sustainable workplaces which companies demand is a worrying trend. A continuation of this severe constraint on supply in the worst-case scenario matters not just to Westminster, but to London and the UK as a whole.”
Photo by Carmela Sarsora from Pexels
