Drawing in the West End horns

News

Stacey Meadwell

01 March 2008

Roller coaster Agents are ambivalent about the West End, where a wide client base offers some insulation from instability – but no invulnerability

At Knight Frank’s central London breakfast last month, the recap on how accurate the previous year’s predictions proved was curiously absent. In fact, there was a bearish tone to most of the presentations – surprisingly so, when many commentators have been so keen to downplay the effect of economic instability.

But West End agents do have some reason to feel smug compared to their City colleagues. There is no deluge of new office space due this year, nor indeed next – with only 1.4m sq ft under construction, most of it in fringe locations, and with Knight Frank predicting that the vacancy rate will remain stable at 4.4% at the end of the year, dropping to 3.9% in 2009. Compare this to the City, which is heading towards double-digit vacancy rates.

James Roberts, head of central London research at Knight Frank, says: “The West End is not showing any signs of vulnerability, as lack of supply is providing insulation against the cooler economic environment. Contrary to what people would expect, the fund managers and private banks in Mayfair and St James’s are still taking space.”

West End agents are also quick to point to the wider range of occupiers in their patch, compared to the financial services-dominated City.

And when it comes to West End office rents, Knight Frank’s outlook is a little bullish. John Snow, head of central London offices, says: “The double-digit rental growth in the past four years cannot and will not continue. Prime rents are £110 per sq ft and will continue to grow, but at a slower rate. We predict they will reach £122 per sq ft by 2011.”

Knight Frank is not alone in predicting rental growth in the West End. King Sturge is equally confident, and a recent report stated: “Further prime rental growth is expected in the West End over the next year due to the still very limited stock of grade-A accommodation (especially in the core) and a historically low vacancy rate (during a 20-year period).”

Yet however bullish or bearish their views, no-one can deny that this year is going to see bumpier market conditions than those enjoyed of late. It will be telling if Knight Frank’s central London breakfast presentation next year reflects on the predictions it has just made.

Roller coaster Agents are ambivalent about the West End, where a wide client base offers some insulation from instability – but no invulnerability At Knight Frank’s central London breakfast last month, the recap on how accurate the previous year’s predictions proved was curiously absent. In fact, there was a bearish tone to most of the presentations – surprisingly so, when many commentators have been so keen to downplay the effect of economic instability. But West End agents do have some reason to feel smug compared to their City colleagues. There is no deluge of new office space due this year, nor indeed next – with only 1.4m sq ft under construction, most of it in fringe locations, and with Knight Frank predicting that the vacancy rate will remain stable at 4.4% at the end of the year, dropping to 3.9% in 2009. Compare this to the City, which is heading towards double-digit vacancy rates. James Roberts, head of central London research at Knight Frank, says: “The West End is not showing any signs of vulnerability, as lack of supply is providing insulation against the cooler economic environment. Contrary to what people would expect, the fund managers and private banks in Mayfair and St James’s are still taking space.” West End agents are also quick to point to the wider range of occupiers in their patch, compared to the financial services-dominated City. And when it comes to West End office rents, Knight Frank’s outlook is a little bullish. John Snow, head of central London offices, says: “The double-digit rental growth in the past four years cannot and will not continue. Prime rents are £110 per sq ft and will continue to grow, but at a slower rate. We predict they will reach £122 per sq ft by 2011.” Knight Frank is not alone in predicting rental growth in the West End. King Sturge is equally confident, and a recent report stated: “Further prime rental growth is expected in the West End over the next year due to the still very limited stock of grade-A accommodation (especially in the core) and a historically low vacancy rate (during a 20-year period).” Yet however bullish or bearish their views, no-one can deny that this year is going to see bumpier market conditions than those enjoyed of late. It will be telling if Knight Frank’s central London breakfast presentation next year reflects on the predictions it has just made.