June 16, 2014
The revival of London’s financial, professional and business sectors, along with sustained demand from the TMT (Technology, Media and Telecoms) market is resulting in increasing demand for commercial property across Central London. This along, with a restricted supply of existing stock, due to conversion of office to residential usage is prompting many occupiers into making relocation decisions well in advance of a lease break or expiry. Cluttons’ London Property outlook for the second quarter of this year shows that rental costs are increasing in response to sustained demand, with a west to east migration by occupiers in evidence. Many tenants are also relocating from London’s West End to the Southbank area; while further out, ‘fringe’ areas such as Stratford are drawing tenants.
Interest has been particularly high in and around Farringdon, where rents have already risen by as much as 60 per cent since the market low in 2009. A similar rise is being seen around Old Street, which incorporates ‘Tech City’.
Fringe areas, such as Stratford’s international quarter has attracted the Financial Conduct Authority (FCA) and Transport for London (TFL), both well ahead of lease expiry in 2018. In fact, pre-lets have accounted for one third of Central London lettings during 2014, with this activity more prevalent within the City core. For example, M&G Investments completed on 323,000 sq ft in May at Fenchurch Avenue and Mizuho is set to complete on 195,000 sq ft at New Ludgate EC4.
Cluttons says Westminster Council is to tighten up planning permission for commercial property to residential conversions. In future, if a proposed conversion would result in a loss of workspace the Council deems particularly suitable for small to medium sized enterprises, an equivalent amount of floor space will now need to be provided onsite, or if not feasible, via off-site provision or a payment in lieu to support a replacement elsewhere.