EG LONDON SMALL OFFICESLLONDON
SMALL DEALS MAINTAIN AGENCY TURNOVER
While most agencies admit that leasing small offices requires a disproportionate amount of work, such deals are important in a West End market thin on major lettings and where the high cost of property and lack of new build mean small offices dominate. Tony Parrack of Edward Charles cites
“turnover and fluidity” as the upside of smaller leasings, which attract a higher fee structure because of the work involved. “Inevitably, you see a lot of properties and the clients tend to be very personally involved,” he reflects.
Cushman & Wakefield’s Guy Taylor
describes such deals as the “bread and butter” of West End leasing and adds: “Where we can get involved with the architect at the outset, then there is the opportunity to deliver some real value.” Mark Gilbart-Smith, director in the
Savills West End team, points out that with little in the way of covenant, landlords need to examine the financials very carefully. “Often the prospective tenant may be unrepresented,” he says, “which means there is a lot of hand-holding.”
Almost 10,000 sq ft has been let at 23 Savile Row, W1, at £105 per sq ft
disposed of – down 220,000 sq ft on the same time last year. Further, it was the fourth-lowest
quarterly total in this market in the past three years, which is attributed to the lack of available space (availability is around 5.5%), and caution on the part of businesses in taking the plunge on the higher-priced stock available. Overall, agents are waiting for
stronger economic fundamentals before a clearer picture emerges, and small space demand is being driven as much by lease events and downsizing as it is by new entrants. A gradual slowing of supply could help, but this may take as long as 12 months to show through.
“Often the prospective tenant may be unrepresented, which means there is a lot of hand-holding”
KEY DRIVERS WEST END SMALLER OFFICES
l Hopes that recent headline rents of £100+ per sq ft could pull up entire market. l Demand remains thin, although Q2 expected to be busier than Q1, with finance and mining and exploration the only growth sectors. l Activity highest below 4,000 sq ft. l Demand created by lease events more than new players; agents looking to macro-economy as trigger for increase in demand.
NUMBER OF 1,000-5,000 SQ FT UNIT DEALS (WEST END)
100 200 300 400 500 600
Source: EGi London Offices 2000
0 18 2001 2002 2003
www.estatesgazette.com 2004 2005 2006 2007 2008 8 June 2013 2009 2010 2011 2012 [to mid-May] Taylor notes that certain sectors are in
the ascendancy, underlining the diversity of clients that target the West End. “The story so far has been about media
and technology companies, but we are seeing growing demand from a variety of financial companies across the sector, from investors to hedge funds,” he says. “Mining and exploration continues to
show strong demand, while I think the manufacturing sector is one to watch. Of course, everyone is waiting on more positive signs of economic activity – that tends to act as a catalyst for mergers and acquisitions, expansion and consolidation as companies re-gear, and it drives demand in the smaller space market as those businesses tend to be the first to upsize in a recovery. But we are not seeing evidence of that yet.” Tony Parrack, partner at Edward
Charles, adds: “It’s the multiplier effect. Right now there are around 270 offices available at less than 4,000 sq ft, compared with 120 above that size up to 10,000 sq ft. The beginning of the year was quite thin both on the supply and demand sides, but we expect a busier end to Q2 in terms of take-up.” Despite the moribund economy failing
to inject vibrancy into the sector, Parrack adds that the sub-5,000 sq ft market remains the fastest moving: “Although there is also a shortage of space at the 10,000 sq ft single-floor level, I would be tempted as a landlord to consider where these could be broken into 5,000 sq ft spaces. There is more fluidity at this size, the rent-free periods tend to be shorter and it should be much quicker to deliver a tenant.”
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