Last Word: advance to Mayfair

Mayfair, the home of hedge funds, oil companies and high-end fashion. The home to wealthy occupiers who want to be in Mayfair, and nowhere but Mayfair. The upper end of the office market in this glamorous location is typified by high rents in small units. Looking over EGi data there are peaks of £130 per sq ft paid for 138 sq ft and 525 sq ft units in 2007, and the same for 765 sq ft in 2012. But the recession did not go unnoticed in Mayfair. While average achieved rents clung on in 2008 at the £70 per sq ft level, by 2009 they were down to £49 per sq ft and an alarmingly low £44 per sq ft in 2010. The market has been on an upwards curve since then and it shows no signs of stopping – rents are tracking at an average of £67 per sq ft in 2014, and lease lengths are getting shorter. In most other submarkets in London, or even the world, a shortening lease length would be viewed as negative, but not Mayfair. Such is the confidence in demand in the area that a shorter lease is an opportunity to asset manage and increase the income of the property. Landlords in this submarket are rarely looking to sell, so the freedom is welcomed. However, this prime location’s office stock is under threat. The attractive capital values on residential properties are so far above what can be achieved for an office that there is room to convert and still turn a significant profit. This is nothing new; what is new is the trend for the “maison concept”, brought to my attention by David Brogan of Mayfair experts BDG Sparkes Porter. Retailers in the heart of Mayfair around Dover Street, Albemarle Street and Bond Street no longer just want a store front, they want a whole building top-to-bottom in their own image – look no further than the stores of Alexander McQueen, Paul Smith and the forthcoming Victoria Beckham store. According to EGi planning data, Albemarle Street alone has permission which translates into the loss of more than 35,000 sq ft of office space to a combination of retail and residential – that is room for a lot of sub-1,000 sq ft office deals. Brogan’s partners are quick to point out that while the office stock might be shrinking, it is not necessarily bad news. One result has been an improved public realm that makes the area stand out from neighbouring St James’s, even with the improvements made by the Crown on Regent Street. And the pressure cooker of less office stock and ever-increasing demand means deals are more straightforward to get over the line. The recession may have slowed the Mayfair market, but it did little to take the wind out of its sails, and nowhere else in London is likely to catch it. Tom.Pilkington@estatesgazette.com