Increasing Government demand for office space and luxury retailing has elevated London’s West End rents further above the City´s. The expansion of governmental departments, as well as hedge funds and boutiques is contributing to the rise of rental prices in West London. In the first quarter of 2004 rents increased 8% to £65 per sq ft.
Some firms, including Blackstone and GE Capital, are reportedly paying up to £80 per sq ft for properties in Mayfair´s Berkeley Square.
In the late 1990s, West End office rental prices overtook those in the City, which was traditionally the leader in the London office market and the gap has widened further in the last few months. Analysts put this trend down to restrictive planning policy in the West End. In Westminster for example, for every new office built, the developer must match it in residential space.
Jonathan Evans, Director at DTZ commented: 'The City used to be more expensive but due to the elasticity of supply, especially with the development of Canary Wharf, rents are depressed.'
CB Richard Ellis estimates that up to 12m sq ft of office space is taken up by government agencies and departments in central London. However, this looks likely to change. Sir Michael Lyons, former Chief Executive of Birmingham City Council, recommended governmental relocation to the regions, after a review of government property. This could lead up to 3.2m sq ft of office space in London being vacated.
John Burns, Managing Director of Derwent Valley, the London property developer, said: 'The market is not completely dependent on government. There is life after government.'
Source: Freeman / The Times