West End rents will reach £300 per sq ft, says BNP PRE

Rents for best-in-class office space in the West End will hit record levels next year as demand continues to outstrip supply. BNP Paribas Real Estate has forecast rents for super-prime stock will rise to up to £300 per sq ft by December 2024. It said it had already seen rents of £200 per sq ft “regularly discussed” on prime buildings. Simon Knights, head of West End agency at BNP PRE, said: “My prediction is that we could see rents reach highs of up to £300 per sq ft by December 2024,” adding that demand “continues to prove the naysayers wrong that believed the end is nigh for the office sector”. “You don’t need a crystal ball to see where the super-prime West End office market is headed. We predicted last year that leasing events, business growth plans and the importance of employing talent would drive the market and all the cynics accused us of being terrifyingly optimistic, and look, we have seen rents of over £200 per sq ft regularly discussed on prime buildings.” He added that the volume of space being taken was also increasing. “Banking and finance occupiers, in particular, continue to steer the direction of the market. This activity has seen footprints rocketing in size and discussions around super-prime rents move to new heights as the grapple for space becomes increasingly more heated and competitive.” West End take-up climbed from 520,000 sq ft in Q2 2023 to 746,000 sq ft, while the vacancy rate stood at just below 6%. In Mayfair and St James’s, the grade-A vacancy rate is around 3%, BNP PRE said. Prime West End rents currently stand at £150 per sq ft, up 7.1% year-on-year. Rents in excess of £150 per sq ft have been achieved at the super-prime end of the market, for instance at 65 Davies Street, W1, which let at £185 per sq ft, 38 Berkeley Square, W1, at £180 per sq ft, Berkeley Square’s Lansdowne House, W1, at £175 per sq ft and 75 Grosvenor Street, W1, which let at £170 per sq ft. Oxford Economics calculated that total Westminster office-based employment growth increased by 20.1% between 2018 and 2023, translating to an increase of around 84,000 employees, while financial employment grew by 35.9% over the same period. Westminster employment growth is expected to slow to 2.7% between 2023 and 2027, while West End office stock is expected to increase by 4.4% over the same period. Knight said: “Office-based employment growth statistics, the aggressive expansion of the financial sector and how it compares against the pipeline of stock is massively important to this success story, regardless of whether it slows down or not. This uptick against the constrained supply will only aggravate bidding even further and will act essentially like a pressure cooker on the rents.” Banking and finance remained the most active office sector, accounting for 32.6% of take-up across 20 deals equating to over 243,000 sq ft, representing a quarter-on-quarter increase of 66.5% in the West End. Knights said: “These occupiers seeking out these new premises are less concerned by physical occupancy and are more much enlivened by location, talent, status and growth. “Reputations are on the line for these predominant occupiers and they will not give up without a fight if the space meets their needs. We might see some new kids on the block as a result, sure, but my money is on those guys to continue ruling the school.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Photo by Nicolas McComber/iStock