TMT companies moving out beyond the West End – Jones Lang LaSalle
New data from Jones Lang LaSalle shows that technology, media and telecoms companies are increasingly thinking about moving or expanding beyond the West End of London, where prime rents have hit £95 per sq ft and supply remains constrained.
JLL says companies in the TMT sector are considering office space in Midtown, Farringdon and the Southbank areas of London, where available offices are more plentiful – and cheaper. The firm says companies such as Skype, LinkedIn, Google, Saatchi & Saatchi and Ogilvy & Mather are among those looking beyond their traditional West End offices locations in order to meet their office requirements.
Nevertheless, high-quality new or refurbished buildings in the West End continue to let, despite the current economic uncertainty, JLL says, which has spurred several new developments to start this quarter in the West End.
Prime rents for office property in the City are expected to remain stable into 2012, with JLL forecasting some growth in the second half. In the meantime, however, thanks to the migration of TMT sector companies from the West End, some areas in fringe City locations such as Farringdon, Old Street and Spitalfields are seeing good levels of demand, the firm says, and are experiencing continued rental growth driven by competition for the best office space.
JLL says take-up in the City totals 3.1m sq ft for the year to date, compared with 6.1m in 2010. While prime rents remained stable at £55 per sq ft for the fifth quarter in a row, high-quality ‘iconic’ buildings such as the Heron Tower have achieved rents of more than £60 per sq ft, the firm notes. JLL says requirements in total have risen 5% to 10.2m sq ft but it notes that many occupiers are still very cautious, given the current economic environment.
In the West End, year-to-date take-up is 2.8m sq ft, compared with 3.7m sq ft in 2010, JLL notes, with prime rents remaining stable at £95 per sq ft. Rent-free periods are around 16 months for a 10-year term, it adds. The Grade A vacancy rate is currently running at just 2.4%, which is well below the long-term average of 3.1%. The overall West End vacancy rate is 4.5% compared with the long-term average of 5.9%.
