by Duncan Lamb
While the world’s financial markets continue to slide and City office developers, agents and investors sit tight and hope for the best, those involved in the West End sector can afford to be more sanguine about their prospects.
Although the stock market crash will place a dampener on the red-hot progress of rents that the market as a whole has experienced recently, the West End office market does not have the same degree of exposure to a single sector as the City has to the financial markets.
Expanding on this argument in their West End Office Demand Survey, agents Savills state: “While the West End has tended recently to under-perform the City in terms of rental growth for offices, the level of rents prevailing in the West End is based on a more sustainable level of demand than in the City.” A total of 5.9m sq ft of offices were taken in the West End in the year to the end of June compared with 8.2m sq ft in the City.
In support of their argument, the agents cite the “many attractions” that the City cannot match — high-quality residential areas, a more varied business infrastructure with hotels, restaurants and specialist retail services which “provide a more attractive working environment”.
The Savills survey, covering an area from Holborn to Hammersmith, notes that the financial sector took 18% of the space in the West End, compared with 57% in the City.
In addition, the agents do not believe that, with the “underlying strength of the economy”, a significant amount of space is likely to be released by traditional West End occupiers. Accordingly, they believe that the buoyancy of demand for offices in 1986-87 will continue and, with a continued shortage of supply of space, will maintain rental levels.
In their Central London Office Market bulletin, Richard Ellis report that top rents have risen by an average of almost 39% in the first nine months of the year.
In response to the stock market crash, they say: “There is currently only limited evidence that occupiers who have taken prelets on large amounts of space in the City are changing their plans regarding occupation of these buildings, albeit that most decision-taking has been postponed.”
