Central London Office Property Rising On Shortage Of Supply Of Grade 'a' Space.
NB Real Estate, the central London office specialist agency, say that the huge interest witnessed from investors in the London market over the past two quarters shows no signs of abating. Many funds have been set up to take advantage of what was often characterised as the best buying opportunity for a generation but have been thwarted by the lack of stock.
Yields have hardened, in some cases by over 100 basis points. As a consequence, investors are becoming more adventurous where funding availability allows them to be. Shorter income opportunities are now attracting greater interest as the mist starts to clear and a more positive trend appears to be emerging on the occupier side of the equation.
A key factor in this has been the severity with which the development pipeline was switched off. NB Real Estate figures point to a remarkable 92% increase in take-up in the City compared to the previous quarter and an increase of over 50% compared to the same period last year. A substantial proportion of this is represented by Nomura's take-up of 540,000 sq ft at Watermark Place. At the same time availability in the City decreased by 14% since the last quarter.
Grade A space suitable for major corporate use remains a scarce commodity. It would take only a handful of lettings to take out most of the available space of this type in the City.
In the West End there are even fewer 'destination' locations with City feel and spec. When such space becomes available they attract premium rents but they do not, of course, typify the general run of West End stock. One is the new scheme at 23 Savile Row where a number of lettings have been agreed at headline rents exceeding 90 per sq ft. Another is Devonshire House in Mayfair where Bain Capital has recently agreed to take about 41,000 sq ft (albeit only 18,000 of additional space). The rent agreed was 90 per sq ft which underlines its premium status but with a rumoured 32 month rent free, a service charge cap and a 70 per sq ft capital contribution there is a bigger story behind the headline figure.
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