London sees rise of ‘super-prime’ office sector

Old office stock has inched closer to obsolescence as 38% of all central London leasing deals now fall into the “super-prime” category, according to research from CBRE. Since the pandemic, the gap between the best and the rest of the capital’s office stock has widened, with occupiers willing to pay more for prime stock. This hunt for the best office stock London has to offer has led to the emergence of a super-prime segment. The term was used by the agency to define any rent achieved above the prevailing prime rent for a specific market. A total of 37 deals transacted at a rent of £100 per sq ft or higher in Q1 2023, which was the most of any quarter on record, the agency found. This high-rent segment of the market represented 18% of sq ft take-up in the quarter and 14% of the market in terms of deal count. “What is clear is that Q1 2023 was not an outlier,” said Simon Brown, senior director and head of office research at CBRE. “The trend towards high-rent deals has been evident since the end of lockdown and, for the first time, £100+ per sq ft rents are becoming more commonplace outside of the West End. “While leasing activity in general has slowed since the pandemic, we have seen an uptick in activity for the very best-quality space.” The picture in the City was not dissimilar, as in the 12 months to Q1 2023 there were six leasing deals in the City where rents over £100 per sq ft were achieved. Prior to 2022, there were only three City deals in total since records began that commanded a rent in excess of £100 per sq ft. Across the capital the picture was more cohesive and showed a demand for quality, as 38% of all central London leasing deals over the past 12 months were for offices categorised as super-prime. Adam Cosgrove, head of West End leasing at CBRE, added: “We have seen super-prime transactions across all West End submarkets, but it has been particularly pronounced within Mayfair and St James’s, where rents have been secured significantly ahead of the prevailing ‘headline prime rent’. “The super-prime transactions have been driven by demand from occupiers looking to secure the very best space with strong sustainability credentials. “We are also seeing a far greater spread of rents being secured within buildings, with the highest rents being achieved on the standout floors, often benefiting from access to private terraces and high-quality amenity space.” To send feedback, e-mail chante.bohitige@eg.co.uk or tweet @bohitige or @EGPropertyNews Photo © Thomas Krych/ZUMA Press Wire/Shutterstock