Demand for London Office Space Booms in First Quarter of 2015

By Simon Morris On Thursday, April 09 th, 2015 · no Comments · In , ,

Demand for London office space has boomed in the first quarter of 2015. Property expert Simon Morris explores whether the risks of investing in this lucrative sector outweigh the significant rewards.

The business hub of the UK

London is a global financial centre and the heart of the UK’s economy. Estimates from the Centre for Economics and Business Research indicate that London’s economy is set to grow 15% in the next five years. It will expand at a faster rate than the economy of every other region in the UK.

London is an incredibly desirable place to set up a business. This is reflected in the growth of its lucrative office sector. Figures from property group Grosvenor indicate that the London office sector has racked up annualised growth of 17.2% per year for the last five years. In contrast, UK property as a whole recorded a total return of 12%.

2.4 million square feet of London office space rented in Q1 of 2015

New figures from commercial estate agent Cushman and Wakefield suggest that the London office-lettings market pushed itself to new heights in the first three months of 2015.

Tenants rented a record 2.4 million square feet of office space in the opening quarter of 2015; the best start to the year the office market has seen since the beginning of the economic crisis. One deal pushed the lettings market up 34% on the same period last year. Professional services company Deloitte signed an agreement to rent 270,000 square feet, pre-let, at 1 New Street Square.

Vacancy rates in the West End fall to 2.3%

Meanwhile vacancy rates in one of London’s most exclusive areas, the West End, dipped to 2.3%. Vacancy rates haven’t fallen this low since the year 2000. This spurred Syrian billionaire art dealing family the Nahmads to set a new record for the highest office rent ever paid in London. The Nahmads shelled out £185 per square foot to establish a private family office on the top floor of Green Property’s 8 St James’s Square development.

Andy Tyler, the Head of West End office agency at Cushman and Wakefield, commented on the rise of central London office space. Tyler was quoted by the Evening Standard saying that “it is clear that rising rents and scarcity of product are leading to a redistribution of occupiers across central London, particularly West End occupiers.”

Should you invest in London office space?

This is the story across London. It should make you think before you invest in London office space. It’s a risk vs. reward game. It takes a lot of capital to invest in London office space but the potential rewards are significant. Is it worth the investment? Seek expert advice and read Simon Morris’ free guide to property investment in 2015 before you commit to any course of investment.

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