West End Leasing Market
Overview
Q2 office take up in the West End continues to show that whilst the market is operating in sub-optimal economic conditions it remains resilient, particularly for the best buildings in the most prestigious locations. Pre-letting activity continues to make up a large proportion of the total leasing activity as occupiers look further forward to satisfy their plans for office working in London.
Take up figures for the West End overall exhibited a slowing of activity, showing a drop of c. 20% to the same point last year.
Supply of space has remained stable throughout Q2 standing at c.6.6M sq ft, with the proportion of tenant-controlled space remaining constant from the same period last year at c.20% of total availability.
Whilst there is a record amount of new space set to complete this year, c.40% has already been pre-let, while increasing cost pressures may contribute to further delays of some planned developments.
6 Chesterfield Gardens, W1
38 Berkeley Square, W1
Headline Allsop Deals
The transactions undertaken by the Allsop West End Leasing team in a more challenging Q2 continue to bear out the overall themes we are seeing in the market.
Firstly, the core sub-markets of Mayfair, St. James’s and Marylebone are continuing to perform strongly with low levels of availability and strong rents being set.
We were delighted to let the 2nd, 3rd and 6th floors at 13 Berkeley Street, W1 totalling 4,250 sq ft to the French luxury design house, Hermès on behalf of Viridis Real Estate. In addition, for the same Landlord we have also secured a private family office for a letting of the Ground Floor at 6 Chesterfield Gardens, W1 comprising 4,000 sq ft of Grade A office space with a large courtyard.
Secondly, we are continuing to see good levels of demand for fully fitted smaller suites. We were pleased to continue the letting success on behalf of L&G at 43 Eagle Street, WC1 where the lower ground floor of high quality fully fitted accommodation comprising 2,300 sq ft was let to Eagle Eye Solutions at an exceptional rent equating of £59.50 per sq ft for lower ground space.
Headline Market Deals
Once again, pre-lets played a crucial role in key lettings in Q2. The standout transaction of the quarter was Chanel’s pre-let of the entirety of BEAM’s 38 Berkeley Square, W1 development comprising 86,000 sq ft. The terms of the deal remain confidential at present although we understand rents on the best floors in the building to be c.£200 per sq ft. The building is due for Practical Completion in Summer 2024.
Another notable pre-let is investment bank Harris Williams acquiring 19,000 sq ft at 65 Davies Street, W1 at a blended rent equating to £167.50 per sq ft. This deal follows on from the lettings to SPX Capital and Hayfin Capital Management, leaving only the 1st floor in the building available prior to its planned PC in Q4 2023.
Outside of Mayfair, Land Securities have let 2 floors in their Lucent W1 redevelopment behind the Piccadilly Circus lights, where global investment firm Eisler Capital have secured 50,000 sq ft on a pre-let of the 4th and 5th floors. This leaves only one floor remaining in the development where works are due to complete late summer.
The core sub-markets of Mayfair, St. James’s and Marylebone are continuing to perform strongly with low levels of availability
Direction of Travel
The desire for occupiers to “earn the commute” from their staff will continue to see the best buildings in the best locations outperform at rental levels that look set to continue an upward trajectory over the coming years.
These premium buildings are still commanding long lease terms of 10-15 years, particularly on larger pre-lets, due to high demand. However, older buildings are having to offer an increasing amount of lease flexibility to occupiers, many of whom are still getting to grips with hybrid working strategies and have not yet formed a long-term view about where their office occupancy levels will settle.
We are seeing increasing numbers of landlords being happy to cater for this, offering flexibility for both new occupiers and to existing tenants whose leases are coming to an end. Enabling an existing occupier to extend for a short term pushes potential voids out while the market stabilises and enables Landlords to avoid current inflationary pressures which have significantly increased the costs of refurbishing or redeveloping vacant space.