Prime West End office rents increased 19% year-on-year from £117.50/sq ft to £140/sq ft in the final quarter of last year, according to data from BNP Paribas Real Estate.
Take-up in the West End in Q4 increased 43% to 1.4m sq ft taking the full year total for 2022 to 4.3m sq ft – a 58% increase year-on-year and significantly above the 10-year average.
In the City, prime office rents stayed at £72.50/sq ft and take-up hit 1.2m sq ft in Q4, bringing 2022 totals to 5.5m sq ft – up 42% compared with 2021 and in line with the 10-year average.
Supply of office stock in the West End decreased to 2.5m sq ft in Q4 with the vacancy rate falling to 4.0% from 4.4% in Q3. Supply in the City decreased by 5% to 9m sq ft, with the Grade A vacancy rate hitting 4.3%.
In terms of occupier activity, in the West End banking and finance occupiers accounted for 36% of deals (compared with 16%), whereas media and tech companies accounted for 13% of activity (compared with 41%). In the City, banking and finance and public sector deals slipped from 15% to 12% 5and 5% to 2% respectively.
Notable deals in Q4 last year included Blackstone and GSK pre-letting circa 225,000 sq ft and circa 161,000 sq ft at Lansdowne House and Earnshaw respectively in the West End, and Clifford Chance pre-letting circa 321,000 sq ft at 2 Aldermanbury Square in the City.
Simon Knights, head of West End agency at BNP Paribas Real Estate, said: “As the economic landscape continues to provide a bumpy terrain, some businesses will reduce headcount. When the new EPC legislation comes into play in April, we will start to see less appropriate stock shed back onto the market.
“All setbacks need a solution and the demand will continue to drive the upgrades needed for this stock to be re-let. With the big bucks continuing to flock in from the likes of private equity and finance for new and amenity rich spaces, the West End continues to prove why it will rarely bite back, and you only have to look back to see this.”
James Strevens, head of City leasing at BNP Paribas Real Estate, added: “Occupational demand for the City has an eagle-eyed focus on quality and amenity with a desire for premium offices offering superior workplace experiences and, of course, enhanced ESG credentials.
“Professional services have swooped in as we see media and tech losing pole position, and occupiers are showing an increased interest in Cat B ‘plug-and-play’ accommodation across a broadening size range, driven by the need for flexibility, convenience and the avoidance of associated fit-out costs. Who will win in the end? West End or City? I think both are formidable forces.”
