RESEARCH Guide to rents, rent free periods & market trends - Q2 2017 - Amazon AWS
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RESEARCH Guide to rents, rent free periods & market trends Q2 2017
HOW IS THE LONDON OFFICE MARKET FARING others having made post-EU referendum GRADES OF OFFICE ACCOMMODATION
ADVISOR’S SINCE THE REFERENDUM ON EU MEMBERSHIP?
MUCH AS THE CARTER JONAS RESEARCH TEAM
decisions to expand their operations in
London. The technology sector continues
to plug the gap in the demand for office
For marketing purposes office accommodation is generally
categorised into Grades which are defined as follows:
HAD PREDICTED WHEN THE REFERENDUM RESULT space left by the banking and financial Grade A
services sector, post 2008/09 credit crisis,
WAS ANNOUNCED, THE MARKET HAS NOT GONE particularly in the City of London, where the
New or newly refurbished office space where the building
specification includes suspended ceilings and fully accessible raised
INTO FREE FALL BUT HAS, INSTEAD, ENTERED
TENANT
occupier profile is gradually shifting away floors for data/telecoms cable management, passenger lift and air
A PERIOD OF READJUSTMENT, REFLECTING from financial services. conditioning facilities.
A LOWER LEVEL OF DEMAND, WITH RENTS As recently highlighted by The Coalition
For A Digital Economy, if the UK is to continue Grade B
DECLINING AND RENT FREE PERIODS INCREASING. to dominate the European technology scene Office space that may only incorporate under floor or perimeter
it is essential that post-Brexit immigration and trunking for data/telecoms cable management, rather than fully
visa regulations are ‘gig-economy friendly’ accessible raised floors, and/or air cooling facilities, instead of an
Vacancy levels are, in parallel, gradually RENT FREE PERIODS to ensure that UK based firms can recruit the air conditioning system that dehumidifies, filters and draws fresh air
increasing as new office developments Rent free periods across all the London office brightest and the best tech entrepreneurs and into the building. Grade B space also tends to be of a generally lower
reach completion. Supply has been further sub-markets have continued to increase by, developers from a global talent pool. quality building specification.
boosted by increased vacancy in second typically, 1 - 2 months for a 10 year lease since
hand stock as some tenants implement agile January this year. In many parts of London it EMERGING MARKETS & THE “Refitted”
working and hot desking policies to reduce is now possible to secure rent free periods of ELIZABETH LINE/CROSSRAIL Office space that is ‘as new’, having been completely refitted
their property footprint and trade up into new, 10-12 months on a five year lease and 20-24 Regeneration initiatives, including transport throughout, to include new fixtures and fittings to the common parts
more efficient, buildings. months on a ten year lease. infrastructure improvements, in areas including and reception area, new building services – including air conditioning
White City, Battersea, Greenwich Peninsula, and passenger lift facilities, electrical, plumbing and lighting systems,
RENTS A MORE ‘TENANT-FRIENDLY’ Wood Wharf in Docklands, Royal Albert Docks and new raised floors, suspended ceilings and sanitary ware. The
Landlords of buildings that have been on the MARKET at Silvertown, Old Oak Common and Wembley specification of works will comply with the latest health and safety
market for much over six months, and where While the economic uncertainty that Brexit are creating new business districts, with lower legislation and may also include re-cladding the exterior of the building.
there is little tenant interest, are beginning has brought is unwelcome it has, nevertheless, rent and business rates profiles, to rival the
to lower their advertised rents, typically by created opportunities for tenants to take City, Midtown and West End . “Refurbished”
£2.00-£5.00 per sq ft per annum, and in advantage of a weaker office market. The Elizabeth Line/Crossrail is scheduled to Space is defined as office accommodation where the landlord
some cases by as much as £8.00 per sq ft per Those tenants with lease expiries or break become operational by December 2018 and has redecorated and recarpeted the available office space (but
annum – a trend that is beginning to gather options should be able to secure far better will put further pressure on the landlords of not necessarily the common parts) and overhauled, but not
pace, in particular, in the City office market. rent and rent free period letting packages properties located in the established central renewed, the building services, such as the air conditioning and
Contrast with the West End sub-market than could have been negotiated a year ago business districts to offer competitive letting passenger lift facilities.
where rents on some super prime buildings as landlords become increasingly anxious not packages as the number of options available
in Mayfair and St James’s have been marked to lose their existing tenants to rivals and as to footloose tenants increases. Some will
down by up to £15.00 per sq ft per annum as landlords with space to let compete more inevitably consider a relocation of all or part
occupiers become increasingly reluctant to aggressively against one another to secure of their operations to lower cost, Crossrail-
Table 1
pay rents over the psychologically significant new tenants. linked, Thames Valley locations where rents
Typical Current and Forecast Rents For New and Refitted Grade A Space
£100 per sq ft per annum. Weaker market conditions are also and business rates costs for new and refitted
Source: Carter Jonas Research
The discounts that can be negotiated on encouraging landlords to offer tenants greater Grade A space, in areas such as Maidenhead
advertised rents have continued to widen lease flexibility – shorter leases and more and Reading, are typically £32.50-£37.50 per
£ per sq ft per annum
and are now typically 3 - 7.5% in contrast to frequent break options. It is also proving sq ft per annum and £7.00-£9.00 per sq ft per
discounts of 2.5 - 5% at the beginning of easier to secure more ‘tenant friendly’ lease annum respectively. Location Q2 2017 Q2 2018 Q2 2019
the year. features such as service charge caps, reduced Mayfair/St James's - Prime £115.00 £107.50 £102.50
There are, however, some isolated or no rent deposits and less restrictive lease WHAT WILL HAPPEN TO RENTS
Marylebone £88.50 £85.00 £82.50
cases where the upper floors of newly assignment/transfer, sub-letting and break OVER THE NEXT TWO YEARS?
constructed buildings continue to set new option pre-conditions. We anticipate that rents in the London office Soho £90.00 £87.50 £85.00
rent benchmarks, including a reported £110.00 market will decline by 4-6% during 2017 and Fitzrovia £80.00 £77.50 £75.00
per sq ft per annum in Soho at 30 Broadwick THE TECHNOLOGY SECTOR by 10-12% for the period up to Q2 2019 – see Victoria £77.50 £73.50 £70.00
Street, over £90.00 per sq ft at The Post The digital economy continues to be an Table 1. We forecast that the greatest falls will
Paddington £65.00 £62.50 £60.00
Building, Museum Street in Bloomsbury, and important driver of demand for London office be in the City, Docklands and Victoria – areas
Holborn £67.50 £65.00 £62.50
circa £190.00 per sq ft is understood to have space with the likes of Expedia, Amazon, where large scale new developments have, or
been agreed at 5 St James’s Square. Apple, Google, Facebook, Snap Group and are shortly to reach completion, and which are King's Cross £82.50 £80.00 £78.50
reliant on large scale, capital intensive, office Covent Garden £80.00 £77.50 £75.00
relocations, typically in excess of 20,000 sq ft. City - Prime £67.50 £65.00 £60.00
Clerkenwell & Shoreditch £65.00 £62.50 £58.50
REASONS TO BE CHEERFUL!
There is, therefore, good reason for tenants to Southwark £67.50 £65.00 £62.50
be cheerful – increased choice, falling rents, Spitalfields £67.50 £65.00 £62.50
Michael Pain longer rent free periods and more tenant Aldgate East £55.00 £52.50 £50.00
Head of Tenant Advisory Team friendly lease terms – trends that are likely to
Hammersmith £57.50 £53.50 £50.00
020 7016 0722 gather pace this year and continue for at least
michael.pain@carterjonas.co.uk the next 18-24 months until the terms of the Canary Wharf £47.50 £45.00 £42.50
UK’s exit from the EU are known. Stratford £47.50 £42.50 £42.50
THE VARIOUS SUB-MARKETS THAT
SUB-MARKET
FORM THE LONDON OFFICE MARKET
EACH HAVE VERY DIFFERENT SUPPLY,
DEMAND, RENT AND RENT FREE
PERIOD DYNAMICS..
CITY CITY FRINGE NORTH CITY FRINGE EAST WEST END
• It has been widely reported that the banking • R
egeneration initiatives, the construction • R
ents for new and refitted Grade A space in • O
ver the last few years the West • T
he loss of office stock to higher
sector is making contingency plans to relocate of new buildings and the promotion of the east City fringe vary between £50.00- End has developed a reputation value residential redevelopment
Euro-dependant banking functions to EU the area as a global centre of excellence £55.00 per sq ft per annum for space in for being one of the sub-markets has catalysed the migration east of
financial centres such as Frankfurt, Paris and for the technology sector are factors the Aldgate East district to £62.50-£70.00 with the shortest rent free periods. established West End businesses to
Dublin in anticipation of the UK government that have conspired to erode the cost per sq ft per annum at Spitalfields, located Following the EU referendum Midtown, the City and City fringe,
agreeing a “hard” Brexit. However, the chief advantages of the north City fringe. closer to the City core. last June, and the subsequent in search of better value for money
executives of banks including JP Morgan and weakening in office demand, rent premises. New Scotland Yard, the
• R
ents for new Grade A office space are • T
he supply of vacant floor space in the
Goldman Sachs have recently stated publicly free periods in some areas of the former Metropolitan Police HQ in
now typically £62.50 - £67.50 per sq ft east City fringe is lower than in the north
that while some City jobs are likely to drift West End have extended to a point Westminster, is one such example –
per annum in Clerkenwell/Shoreditch – City fringe, although under-supply issues
to the EU, Brexit is unlikely to lead to a mass where they are now almost on a par the property is being redeveloped
on a par with locations such as Holborn are slowly being addressed with the
exodus of banking jobs. with the City office market where for luxury apartments.
and the City - contrast with rents of refurbishment of the five buildings forming
rent free periods are typically 10-12
• T
he dominance of the banking and insurance £45.00-£55.00 per sq ft per annum at Royal Mint Court at Tower Hill, totalling
months for a five year lease and 22-
sectors in the City office market continues to three years ago. It is quite possible, 600,000 sq ft, which are scheduled for KEY WEST END LETTINGS:
25 months for a ten year lease (see
weaken as new entrants migrate from higher therefore, that the north City fringe completion during H1, 2020.
office cost map).
cost West End and Midtown locations. will lose ground to more central, better 80 Charlotte Street, W1
• T
he Butterfly Building, which will comprise 133,600 sq ft to Arup
Recent examples of this trend include connected, City and Midtown locations. • T
he current pattern of vacancy
circa 335,000 sq ft when complete in Q1,
Deliveroo’s relocation from Bloomsbury to in the Victoria and Paddington 2 St James’s Market, SW1
• T
he north City fringe sub-market has 2021, is to be developed on the site of the
50,000 sq ft at Cannon Bridge House, EC4 districts is characterised by new or 21,000 sq ft to Formula 1
been one of the most adversely affected Lloyds Chambers Building at Portsoken
and wealth management firm, Rathbone’s, refitted buildings with floor plates
by the 2017 business rates revaluation Street and will further boost tenant choice 7 Clarges Street, W1
move from Mayfair to 75,000 sq ft at 8 typically in excess of 10,000 sq
with rates having typically increased in the east City fringe market – a pre- 23,700 sq ft to Capula
Finsbury Circus, EC2. ft – in contrast to other areas of
from £14.50 per sq ft per annum to over let on part is being sought to kick-start
the West End such as Marylebone, 77 Shaftesbury Avenue, W1
• N
otwithstanding the scale of new City office £20.00 per sq ft per annum where the construction of the development.
Fitzrovia, Mayfair, St James’s and 20,000 sq ft to Snap Inc.
developments currently under construction, property is not subject to transitional
Soho where office buildings tend to
and which are scheduled for completion within relief (see Business Rates box), which Nova North, Bressenden Place,
KEY CITY FRINGE EAST LETTINGS: be of a smaller scale and the floor SW1
the next 12-18 months, a significant number further undermines the location as a
plates are more usually sub-5,000 22,000 sq ft to Child & Child
KEY CITY LETTINGS: have already been part pre-let including lower cost alternative to more centrally
Principal Place, Norton Folgate, EC2 sq ft.
Brookfield’s 100 Bishopsgate, comprising located business districts. 89,300 sq ft to Amazon LSQ, 30 Panton Street, SW1
100 Bishopsgate, EC3
944,000 sq ft, due for completion in 2018, of (take-up of option space) • V
ictoria and Paddington are both 70,000 sq ft to Hearst
256,500 sq ft to • H
elical Bar’s recently completed 25
Freshfields Bruckhaus which over 70% has been pre-let. reliant on national and international
Charterhouse Square, comprising 38,500
Deringer companies with sizeable relocation
• C
ity office rents have typically declined by sq ft, is a rare example of much needed
budgets, with office requirements
20 Old Bailey, EC4 circa £2.50-£5.00 per sq ft per annum since new development in Smithfield – an area
typically in excess of 10,000 sq
60,000 sq ft to Withers Q2, 2016, reflecting weaker demand, post-EU where development is constrained by
ft for 100 or more staff. Brexit
referendum. Similar falls are forecast over conservation area planning policies.
Angel Court, EC2 uncertainty has weakened demand
the next 12 months - see Table 1.
56,000 sq ft to Bupa & in this sector of the office market,
25,000 sq ft to British • R
ecognising the importance of the technology more so than the sub-5,000 sq ft
Bankers Association
sector as an increasingly important engine KEY CITY FRINGE NORTH LETTINGS: market, and it is likely that rents
Monument Building, for economic growth, the City of London will decline and rent free periods
11 Monument St, EC3 Corporation is working with ‘FinTech’ industry The Angel Building, 403 St John St, EC1 extend more so in Paddington and
22,200 sq ft to M7 Real body, Innovate Finance, to develop a fintech 136,650 sq ft to Expedia Victoria than other areas of the
Estate
start-up hub at Broadgate to attract innovative 25 Charterhouse Square, EC1 West End.
technology firms to the Square Mile. 12,200 sq ft to Anomaly
DOCKLANDS &
MIDTOWN SOUTH BANK
STRATFORD THE 2017
BUSINESS
RATES
REVALUATION
The 2017 business rates
revaluation, which came into
effect from 1 April this year, has
been an unwelcome additional
• R
egeneration initiatives, transport • T
he occupier mix in Covent • T
he South Bank office market is characterised • D
ocklands (excluding Canary • W
estfield has also recently gained cost to most commercial property
infrastructure improvements and Garden continues to change – by low vacancy levels – a consequence Wharf) and Stratford are the planning consent for two office occupiers in London. The areas
the development of new Grade moving from one dominated of Southwark and Lambeth Council’s two remaining peripheral central buildings totalling 846,233 sq ft that have seen some of the
A buildings in King’s Cross and by the media and creative planning policies that have encouraged the London office sub-markets that on a site adjacent to its Stratford largest increases in business rates
Bloomsbury have resulted in new industries that have been redevelopment of commercial properties for continue to offer refurbished Grade shopping centre. for Grade A office space include
rent benchmarks of £80.00 - priced out by an influx of higher value residential use. A office space at rents below the City of London, up by an
£85.00 per sq ft per annum being financial and professional £40.00 average of 25% and Shoreditch,
• H
istorically low vacancy levels have
set in both of these Midtown services firms. Many of these per sq ft per annum. KEY DOCKLANDS LETTING: King’s Cross and Spitalfields all
underpinned rents in districts such as London
districts. Contrast with rents of firms have migrated from • T
he Docklands office market is split up by over 35% for properties
Bridge and Southwark. Compared with other Columbus Building, Westferry
£60.00 - £65.00 per sq ft per higher rental and business between the prime (Canary Wharf) not benefitting from transitional
London office sub-markets there has been Circus, E14
annum for Grade A space at both rates cost locations in the and secondary (Crossharbour) 13,600 sq ft to Motive Partners relief. However, in some areas,
a limited decline in rents, while the rents for
locations a couple of years ago. West End. markets. Rents for refitted Canary such as Canary Wharf and
space with river views have remained broadly
• B
loomsbury is the one area of static since Q2, 2016. Wharf office space are typically Mayfair, business rates costs have
Central London that has bucked £42.50-£50.00 per sq ft per annum remained broadly static.
the trend in the decline in rents.
KEY MIDTOWN LETTINGS: • T
he Shard has set new rent benchmarks for
the area with rents for upper floors now well
in contrast to £32.50-£38.50 WEST LONDON
Lettings at two new office The Post Building, 21-31 per sq ft per annum for refitted
New Oxford Street, WC1 established above £90.00 per sq ft per annum, Grade A space located in the
developments – The Avenue, off • T
he redevelopment of the BBC TV
100,000 sq ft to McKinsey reflecting the building’s iconic status. SUBSTANTIALLY ABOVE
Tottenham Court Road and The Crossharbour district. The variation Centre campus, and neighbouring INFLATION RATES
Post Building at Museum Street, • W
aterloo has, for over a decade, been starved in rents reflects both the age and sites, at White City is transforming INCREASES IN SOME
1 New Oxford Street, WC1
have both set new rent benchmarks 60,000 sq ft to H&M of much needed Grade A office space. This the quality of the office stock and the area in to a new, vibrant business AREAS OF LONDON ARE
for the area since the beginning issue is gradually being addressed with the accessibility to public transport. district to rival the West End and, LIKELY TO FURTHER
The Adelphi, John Adam DEPRESS RENTS IN
of the year – rents of £85.00 per development of No. 2 Southbank Place , which • T
he supply of new and refitted not least, Hammersmith. The scheme
Street, WC2 THOSE SUB-MARKETS
sq ft per annum and £90.00 per 35,000 sq ft to PetroChina & will comprise 297,500 sq ft at the former Shell Grade A office accommodation incorporates residential, leisure and
sq ft per annum respectively have 26,800 sq ft to Conde Nast Centre, due for completion in Q3, 2018. in Stratford that is immediately restaurant uses and up to 940,000 sq
reportedly been achieved. Publications available is limited to Here East, ft of office space in five buildings with The office cost map overleaf
• T
he long awaited redevelopment of Elizabeth provides a summary of the typical
the former Olympic Press and phase one now complete offering circa
• B
ecause business rates are based House at York Road, adjacent to Waterloo rent, business rates and service
Broadcast centre. However, supply 290,000 sq ft.
on the rental value of commercial Station, continues. The site has recently been charge costs for each London
is set to increase on completion
properties, areas that have purchased by developer HB Reavis and has • T
enant choice of Grade A space in office sub-market.
of the FCA’s building at the
witnessed high levels of rental planning consent for a 945,000 sq ft mixed use Hammersmith has been boosted While the Government has
International Quarter in April
growth in recent years will be more office, residential and retail scheme, of which by the recent completion of Kier introduced a transitional relief
2018, where circa 75,500 sq ft is
adversely affected by the 2017 c. 750,000 sq ft will comprise offices. The Group’s 58,100 sq ft Kings House capping mechanism to phase in
available to let.
business rates revaluation. King’s timetable for development of the site has yet to redevelopment at Hammersmith Road. business rates increases, the caps
Cross, in particular, has witnessed a be announced. • T
he development of Crossrail have been set at 42% for 2017/18
significant increase in business rates stations at Canary Wharf and and 32% for 2018/19 which afford
costs rising from £22.00 per sq ft Stratford is likely to boost demand KEY WEST LONDON LETTING: little comfort for occupiers facing
per annum to, typically, £31.00 per for office space in both sub- large increases in their rates bills.
12 Hammersmith Grove, W6
sq ft per annum for properties that markets when the Elizabeth Line 29,100 sq ft to Medidata There is a right to appeal
are not subject to transitional relief. becomes operational at the end of the new 2017 business rates
2018. Journey times from the West assessment if an occupier
End, Midtown and City business feels that it is incorrect. More
districts will be reduced to less information is available from
than 15 minutes. the Carter Jonas Business
Rates Team.
CITY FRINGE NORTH
TYPICAL COSTS FOR NEW/REFITTED MID-RISE £97.00
GRADE A OFFICE SPACE OVER 5,000 SQ FT Rent
Business Rates
£65.00
£21.00
Service Charge £11.00 CITY FRINGE EAST
Q2 2017 Total Occupancy Cost £97.00
SPITALFIELDS ALDGATE EAST
Costs = £ per sq ft per annum
Typical Rent Free Periods
5 year lease 8-12 £100.50 £84.00
Rent Free Periods = Months 10 year lease 18-24 Rent £67.50 Rent £55.00
Business rates cost estimates include the Crossrail levy but Business Rates £23.00 Business Rates £19.00
take no account of any transitional relief that may be available Service Charge £10.00 Service Charge
HACKNEY £10.00
Total Occupancy Cost £100.50 Total Occupancy Cost £84.00
STRATFORD
Typical Rent Free Periods Typical Rent Free Periods
MIDTOWN 5 year lease 10-12 5 year lease 10-12
KING’S CROSS HOLBORN BLOOMSBURY 10 year lease 22-24 10 year lease 22-24
£123.50 £104.50 £122.50
ISLINGTON
Rent £82.50 Rent £67.50 Rent £82.50
Business Rates £31.00 Business Rates £27.00 Business Rates £30.00
Service Charge £10.00 Service Charge £10.00 Service Charge £10.00 BOW
Total Occupancy Cost £123.50 Total Occupancy Cost £104.50 Total Occupancy Cost £122.50 STRATFORD
Typical Rent Free Periods Typical Rent Free Periods Typical Rent Free Periods
KING’S CROSS
£69.00
5 year lease 8-11 5 year lease 9-12 5 year lease 9-12 Rent £47.50
10 year lease 18-22 10 year lease 20-24 10 year lease 20-24 SHOREDITCH Business Rates £12.00
EUSTON Service Charge £9.50
COVENT GARDEN Total Occupancy Cost £69.00
CLERKENWELL
£121.00 BLOOMSBURY
Typical Rent Free Periods
5 year lease 10-13
Rent £80.00 10 year lease 21-25
Business Rates £31.00
FITZROVIA
Service Charge £10.00 SPITALFIELDS
Total Occupancy Cost £121.00
MARYLEBONE
Typical Rent Free Periods PADDINGTON HOLBORN
5 year lease 8-11
ALDGATE POPLAR
10 year lease 17-22 CITY OF EAST
SOHO LONDON
COVENT
GARDEN
MAYFAIR
SOUTHWARK
WEST END ST JAMES’S CANARY
WHARF
MAYFAIR & ST JAMES’S VICTORIA MARYLEBONE LONDON
£177.00 £121.50 £137.50 WATERLOO
BRIDGE
Rent £115.00 Rent £77.50 Rent £88.50
CROSSHARBOUR
Business Rates £50.00 Business Rates £33.00 Business Rates £39.00
Service Charge £12.00 Service Charge £11.00 Service Charge £10.00
£177.00 £121.50 £137.50
Total Occupancy Cost Total Occupancy Cost Total Occupancy Cost
CITY
Typical Rent Free Periods Typical Rent Free Periods Typical Rent Free Periods
CITY PRIME CITY SECONDARY
£104.50 £97.00
5 year lease 9-12 5 year lease 9-12 5 year lease 9-12
10 year lease 18-24 10 year lease 20-24 10 year lease 20-24 VICTORIA
Rent £67.50 Rent £65.00
FITZROVIA PADDINGTON SOHO Business Rates £27.00 Business Rates £22.00
£124.50 £100.25 £140.00CHELSEA Service Charge
Total Occupancy Cost
£10.00
£104.50
Service Charge
Total Occupancy Cost
£10.00
£97.00
Rent £80.00 Rent £65.00 Rent £90.00
Business Rates £33.50 Business Rates £24.25 Business Rates £39.00 Typical Rent Free Periods Typical Rent Free Periods
Service Charge £11.00 Service Charge £11.00 Service Charge £11.00 5 year lease 10-12 5 year lease 10-12
Total Occupancy Cost £124.50 Total Occupancy Cost £100.25 Total Occupancy Cost £140.00 10 year lease 22-25 10 year lease 22-25
Typical Rent Free Periods Typical Rent Free Periods Typical Rent Free Periods
DOCKLANDS GREENWICH
5 year lease 9-12 5 year lease 9-12 5 year lease 8-11 CANARY WHARF CROSSHARBOUR
10 year lease 20-24 10 year lease 20-24 10 year lease 17-22
SOUTH BANK £78.05 £60.50
£100.25 Rent £47.50 Rent £37.50
Rent £67.50 Business Rates £16.25 Business Rates £12.00
BATTERSEA
Business Rates £22.75 Service Charge £14.30 Service Charge £11.00
WEST LONDON Service Charge £10.00 Total Occupancy Cost £78.05 Total Occupancy Cost £60.50
HAMMERSMITH Total Occupancy Cost £100.25
Typical Rent Free Periods Typical Rent Free Periods
£87.00
CROSSRAIL LINE
SUBMARKETS 5 year lease 11-14 5 year lease 11-14
Typical Rent Free Periods
West End FULHAM 10 year lease 23-26 10 year lease 23-26
5 year lease 8-11
Rent £57.50
Midtown 10 year lease 18-22
Business Rates £20.50
City Service Charge £9.00
City Fringe North Total Occupancy Cost £87.00
READING
HEATHROW CLAPHAM
City Fringe East Typical Rent Free Periods
5 year lease 9-12
South Bank
10 year lease 20-24
Docklands & Stratford
PUTNEY
THE TENANT ADVISORY TEAM 38 OFFICES ACROSS
THE COUNTRY,
Our tenant representation services include: INCLUDING 12 IN
• Office search and relocation management
CENTRAL LONDON
• Relocation budgeting and planning COMMERCIAL OFFICES
• Lease and rent review negotiation • London
• Bath
• Repairs/dilapidations cost assessment
• Cambridge
and negotiation
• Leeds
• Building, air conditioning and passenger • Oxford
lift surveys • Winchester
• Business rates analysis and appeal
• Service charge audit
For more data on the Central London office market, office
availability, rents and rent free periods and information on
budgeting and planning for a lease renewal, rent review or
office relocation please contact one of the team.
One Chapel Place, London W1G 0BG
carterjonas.co.uk/officesearch
OUR EXPERIENCE KEY CONTACTS
Lease negotiations and relocations 10,000 sq ft+
Michael Pain Partner, Head of Tenant Advisory
020 7016 0722
43,000sq ft UK Payments Administration
2 Thomas More Square, E1
michael.pain@carterjonas.co.uk
Jeremy Gidman Partner, Head of Investment
37,000sq ft Frank Hirth
236 Gray’s Inn Road, WC1
020 7016 0727
jeremy.gidman@carterjonas.co.uk
28,000sq ft Warner Bros/Shed Media
85 Grays Inn Road, WC1
Greg Carter Partner
020 7518 3303
greg.carter@carterjonas.co.uk
23,000sq ft Nursing & Midwifery Council
Two Stratford Place, E20 Ed Caines Associate Partner
020 7016 0724
17,500sq ft Hackett Limited ed.caines@carterjonas.co.uk
The Clove Building, SE1
Luke Wild Associate Partner
16,000sq ft Circle Housing 020 7016 0725
Two Pancras Square, N1 luke.wild@carterjonas.co.uk
Tom Forman Associate
15,000sq ft
Hitachi Rail Europe
40 Holborn Viaduct, EC1 020 7016 0736
tom.forman@carterjonas.co.uk
11,000sq ft Salamanca Group
50 Berkeley Street, W1
Follow us on Twitter,
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© Carter Jonas 2017. The information given in this publication is believed to be correct
at the time of going to press. We do not however accept any liability for any decisions
taken following this report. We recommend that professional advice is taken.
RESEARCH
THE LONDON OFFICE MARKET
RENT & RENT FREE PERIOD GUIDE Q2 2017
LANDLORD’S ADVERTISED
Table 1 Source: Carter Jonas Research
RENTS & RENT DISCOUNTS
London Office Market – Typical Advertised Rents – Q2 2017 (space over 5,000 sq ft)
Table 1 illustrates landlord’s typical
advertised rents as at Q2, 2017. The Location Grade A Grade B
bargaining power in lease negotiations UF: Upper Floors New/Refitted Refurbished Refurbished
is moving towards tenants post Brexit
City
vote as demand for London office space
weakens. In many cases it is possible to Prime – Insurance District £62.50 - £72.50 £52.50 - £62.50 £42.50 - £50.00
negotiate deeper discounts on landlord’s (UF = £85.00 - £92.50) (UF = £75.00 - £85.00)
advertised rents, typically of 3 – 7%, Secondary - Blackfriars, Moorgate £59.50 - £70.00 £47.50 - £57.50 £40.00 - £47.50
compared with a year ago. (UF = £77.50 - £87.50) (UF = £65.00 - £72.50)
The variation in rents is a consequence of City Fringe
the different supply and demand dynamics
of each sub-market. The advertised rents North/North West – £62.50 – £70.00 £55.00 – £62.50 £42.50 - £57.50
Clerkenwell, Shoreditch
on some Grade B warehouse-style office
space in locations such as Farringdon East – Spitalfields £62.50 - £70.00 £55.00 - £60.00 £40.00 - £47.50
and Clerkenwell will typically be higher East - Aldgate East £50.00 - £55.00 £42.50 - £47.50 £37.50 - £40.00
than rents for refurbished ‘corporate’-
South Bank
style Grade A space in the same location,
reflecting the rental premium that creative Waterloo, Southwark, London Bridge £65.00 - £70.00 £55.00 - £62.50 £42.50 - £52.50
and media firms place on such space. (UF= £75.00 - £92.50)
Floors with terraces will usually East London
command a rental premium of 5-10%
Docklands Prime – Canary Wharf £45.00 - £50.00 £42.50 - £45.00 £32.50 - £37.50
above those set out in the table and the
upper floors of buildings that provide Docklands Secondary - Crossharbour £32.50 - £38.50 £25.00 - £31.50 £20.00 - £25.00
panoramic views of London will typically
Stratford £37.50 - £47.50 £27.50 - £35.00 £19.50 - £25.00
attract a rental premium of 20-30% above
those illustrated in the table. West End
RENT FREE PERIODS Central – Mayfair, St James’s (Prime) £110.00 - £125.00 £85.00 - £105.00 £65.00 - £75.00
Landlords are offering longer rent free Central – Mayfair, St James’s £90.00 - £105.00 £75.00 - £87.50 £60.00 - £70.00
(Secondary)
periods than could have been negotiated
before the EU Referendum – typically North – Euston £67.50 - £75.00 £52.50 - £65.00 £40.00 - £47.50
an additional 1-3 months on leases of up
North East – Fitzrovia £75.00 - £85.00 £62.50 - £72.50 £50.00 - £60.00
to 5 years and 2-4 months on leases of
up to 10 years. Table 2 illustrates the North West - Marylebone £80.00 - £90.00 £67.50 - £77.50 £45.00 - £57.50
typical rent free periods that can South – Victoria, Westminster £72.50 - £80.00 £57.50 - £70.00 £47.50 - £57.50
currently be negotiated. (UF = £82.50 - £85.00)
NEGOTIATING A LEASE South West - Knightsbridge £80.00 - £95.00 £70.00 - £77.50 £52.50 - £65.00
– THE KEY ISSUES East – Soho, Regent Street £77.50 - £92.50 £65.00 - £75.00 £52.50 - £65.00
While rent discounts and rent free periods West – Paddington £60.00 - £68.50 £49.50 - £59.50 £40.00 - £47.50
will form the key components of all lease (UF = £70.00 - £72.50)
negotiations it is also important to ‘future-
Midtown
proof’ the lease by building in flexibility
and mechanisms to limit future property North - King’s Cross £75.00 - £85.00 £52.50 - £75.00 £45.00 - £55.00
costs, by negotiating the following:
South - Covent Garden £72.50 - £85.00 £55.00 - £70.00 £45.00 - £55.00
• a service charge cap (UF = £87.50 - £92.50)
• ‘tenant-friendly’ rent review
East - Holborn £62.50 - £70.00 £52.50 - £62.50 £42.50 - £49.50
valuation provisions
• a limitation on the scope of the tenant’s West - Bloomsbury £67.50 - £85.00 £55.00 - £65.00 £45.00 - £50.00
repairing and removal of fixtures and South West London
fittings obligations – to minimise future
exit costs Chelsea £70.00 - £90.00 £57.50 - £67.50 £40.00 - £50.00
• the removal of any onerous sub-letting Vauxhall, Battersea £52.50 - £60.00 £42.50 - £50.00 £30.00 - £40.00
or lease assignment/transfer
West London
pre-conditions
• the inclusion of a tenant-only Kensington £55.00 - £65.00 £45.00 - £52.50 £37.50 - £45.00
break option(s) Hammersmith, White City £52.50 - £58.50 £45.00 - £52.50 £35.00 - £45.00
• no requirement to provide a guarantor
Chiswick £48.50 - £55.00 £42.50 - £47.50 £35.00 - £45.00
and/or rent deposit.
GRADES OF OFFICE Table 2 Source: Carter Jonas Research
ACCOMMODATION Rent Free Periods By Sub-Market – Q2 2017
For marketing purposes office
accommodation is generally categorised Location Typical Rent Free Period Agreed
into Grades which are defined as follows: (lettings over 5,000 sq ft)
GRADE A 5-year lease 10-year lease
New or newly refurbished office space City – Prime – Insurance District 10 – 12 22 - 25
where the building specification includes
suspended ceilings and fully accessible City - Secondary - Blackfriars, Moorgate 10 - 12 22 - 25
raised floors for data/telecoms cable
City Fringe - North/North West – Clerkenwell, Shoreditch 8 – 12 18 – 24
management, passenger lift and air
conditioning facilities. City Fringe – East – Spitalfields, Aldgate East 10 – 12 22 – 24
GRADE B
South Bank – Waterloo, Southwark, London Bridge 8 – 11 18 – 22
Office space that may only incorporate
under floor or perimeter trunking for Docklands Prime & Secondary 11 - 14 23 - 26
data/telecoms cable management, rather
than fully accessible raised floors, and/ Stratford 10 – 13 22 - 25
or air cooling facilities, instead of an air
West End - Central – Mayfair, St James’s 9 – 12 18 - 24
conditioning system that dehumidifies,
filters and draws fresh air into the West End - West - Paddington 9 - 12 20 - 24
building. Grade B space also tends to
be of a generally lower quality West End - East - Soho 8 - 11 17 - 22
building specification.
West End - North East - Fitzrovia 9 - 12 20 - 24
“REFITTED”
Office space that is ‘as new’, having been West End - North West - Marylebone 9 - 12 20 - 24
completely refitted throughout, to include
West End – South - Victoria, Westminster 9 - 12 20 - 24
new fixtures and fittings to the common
parts and reception area, new building Midtown – West - Bloomsbury 9 - 12 20 - 24
services – including air conditioning
and passenger lift facilities, electrical, Midtown – East - Holborn 9 - 12 20 - 24
plumbing and lighting systems, and new
Midtown – South - Covent Garden 8 - 11 17 - 22
raised floors, suspended ceilings and
sanitary ware. The specification of works Midtown – North - King’s Cross 8 - 11 18 - 22
will comply with the latest health and
West London – Hammersmith 9 - 12 20 - 24
safety legislation and may also include
re-cladding the exterior of the building.
“REFURBISHED”
Space is defined as office accommodation TOTAL OFFICE OCCUPANCY COSTS: The Carter Jonas office costs map
where the landlord has redecorated and provides a geographical summary of rent, business rates and building
recarpeted the available office space (but service charge costs. A copy of the map is available free of charge.
not necessarily the common parts) and
overhauled, but not renewed, the building
services, such as the air conditioning and For more data on the Central London office market, office availability, rents and
passenger lift facilities. rent free periods and information on budgeting and planning for a lease renewal,
rent review or office relocation please contact one of the team.
THE TENANT ADVISORY TEAM
ur tenant representation
O
services include:
• Office search and relocation
management
• Relocation budgeting and planning
• Lease and rent review negotiation
• Repairs/dilapidations cost assessment
and negotiation
Greg Carter Michael Pain
• Building, air conditioning and Partner Partner, Head of Tenant Advisory
passenger lift surveys 020 7518 3303 020 7016 0722
• Business rates analysis and appeal greg.carter@carterjonas.co.uk michael.pain@carterjonas.co.uk
• Service charge audit
• Office fit out procurement and One Chapel Place, London W1G 0BG
project management carterjonas.co.uk/officesearch
Follow us on Twitter,
LinkedIn and Instagram
© Carter Jonas 2017. The information given in this publication is believed to be correct
at the time of going to press. We do not however accept any liability for any decisions
taken following this report. We recommend that professional advice is taken.
RESEARCH
THE LONDON OFFICE MARKET
RENT & RENT FREE PERIOD GUIDE Q3 2018
LANDLORD’S ADVERTISED
Table 1 Source: Carter Jonas Research
RENTS & RENT DISCOUNTS
London Office Market – Typical Advertised Rents – Q3 2018 (space over 5,000 sq ft)
The bargaining power in lease
negotiations has moved towards tenants,
post Brexit vote, reflecting weaker demand Location Grade A Grade B
for London office space. In many cases
UF: Upper Floors New/Refitted Refurbished Refurbished
it is possible to negotiate discounts on
landlord’s advertised rents of, typically, City
2.5 - 5%. Prime – Insurance District £62.50 - £70.00 £50.00 - £60.00 £40.00 - £47.50
The advertised rents on some Grade B (UF = £75.00 - £88.50) (UF = £62.50 - £80.00)
warehouse-style office space in locations Secondary - Blackfriars, Aldgate £55.00 - £67.50 £45.00 - £55.00 £37.50 - £42.50
such as Farringdon, Clerkenwell and (UF = £70.00 - £80.00) (UF = £62.50 - £75.00)
Shoreditch will typically be higher than City Fringe
rents for refurbished ‘corporate’ style Grade
North/North West – £62.50 - £75.00 £52.50 - £62.50 £39.50 - £55.00
A space in the same location, reflecting the Farringdon, Shoreditch (UF = £77.50 - £87.50)
rental premium that creative and media
East – Spitalfields £60.00 - £65.00 £50.00 - £60.00 £37.50 - £47.50
firms place on such space.
East - Aldgate East £50.00 - £57.50 £42.50 - £47.50 £37.50 - £40.00
Floors with terraces will usually
(UF = £62.50 - £65.00)
command a rental premium of 5-10%
South Bank
and the upper floors of tower buildings that
provide panoramic views of London will Waterloo, Southwark, London Bridge £67.50 - £72.50 £52.50 - £66.50 £42.50 - £50.00
& Wood Wharf (UF= £75.00 - £93.00)
attract a rental premium of up to 35%.
East London
THE ELIZABETH LINE EFFECT
Docklands Prime £47.50 - £52.50 £37.50 - £42.50 £30.00 - £35.00
New/refitted and refurbished Grade A – Canary Wharf & Wood Wharf (UF = £54.00 - £57.50) (UF = £45.00 - £50.00)
office space located near an Elizabeth Line
Docklands Secondary - Crossharbour £35.00 - £38.50 £27.50 - £33.50 £22.50 - £27.50
station in areas such as Paddington and
Stratford £40.00 - £49.50 £32.50 - £42.50 £20.00 - £28.00
Bloomsbury have seen advertised rents
increase, typically by up to £7.50 per sq West End
ft per annum since Q3 2017, reflecting the Central - Mayfair, St James's (Prime) £102.50 - £125.00 £85.00 - £97.50 £67.50 - £77.50
vastly improved accessibility to markets (UF= £130.00 - £135.00)
and labour supply that Crossrail will bring. Central - Mayfair, St James's £87.50 - £97.50 £75.00 - £85.00 £62.50 - £72.50
(Secondary)
RENT FREE PERIODS North - Euston £67.50 - £75.00 £57.50 - £65.00 £42.50 - £55.00
Table 2 overleaf illustrates the typical
North East - Fitzrovia £80.00 - £87.50 £65.00 - £79.50 £50.00 - £60.00
rent free periods that can currently
be negotiated on office space North West - Marylebone £77.50 - £87.50 £65.00 - £77.50 £50.00 - £60.00
throughout London. South - Victoria, Westminster £70.00 - £80.00 £55.00 - £69.50 £45.00 - £52.50
(UF = £82.50 - £90.00)
NEGOTIATING A LEASE South West - Knightsbridge £85.00 - £95.00 £65.00 - £79.50 £60.50 - £70.00
– THE KEY ISSUES
East - Soho, Regent Street £85.00 - £97.50 £69.50 - £82.50 £55.00 - £67.50
While rent discounts and rent free periods
West - Paddington £67.50 - £77.50 £55.00 - £65.00 £42.50 - £52.50
will form the key components of any lease
(UF = £80.00 - £90.00)
negotiations it is also important to ‘future-
proof’ the tenancy by building in flexibility Midtown
and mechanisms to limit future property North - King’s Cross £75.00 - £85.00 £60.00 - £70.00 £47.50 - £57.50
costs, by negotiating the following: South - Covent Garden £72.50 - £80.00 £55.00 - £70.00 £47.50 - £55.00
• a service charge cap (UF = £82.50 - £85.00)
• ‘tenant-friendly’ rent review East - Holborn £62.50 - £70.00 £52.50 - £62.50 £39.50 - £52.50
valuation provisions (UF = £72.50 - £77.50)
• a limitation on the tenant’s repairing West - Bloomsbury £75.00 - £90.00 £60.00 - £72.50 £45.00 - £55.00
and removal of fixtures and fittings
South West London
obligations – to minimise future exit
costs Chelsea £77.50 - £90.00 £65.00 - £75.00 £47.50 - £60.00
• the removal of any onerous sub-letting Vauxhall, Battersea £52.50 - £60.00 £42.50 - £50.00 £30.00 - £40.00
or lease assignment/transfer West London
pre-conditions
Kensington £55.00 - £65.00 £45.00 - £52.50 £37.50 - £45.00
• the inclusion of a tenant-only
break option(s) Hammersmith £52.50 - £57.50 £42.50 - £52.50 £35.00 - £42.50
• no requirement to provide a guarantor White City £45.00 - £55.00 £40.00 - £45.00 £32.50 - £40.00
and/or rent deposit.
Chiswick £48.50 - £55.00 £39.50 - £47.50 £35.00 - £40.00
GRADES OF OFFICE Table 2 Source: Carter Jonas Research
ACCOMMODATION Rent Free Periods By Sub-Market – Q3 2018
For marketing purposes office
accommodation is generally categorised Location Typical Rent Free Period Agreed
into Grades which are defined as follows: (lettings over 5,000 sq ft)
GRADE A 5-year lease 10-year lease
New or newly refurbished office space City - Prime - Insurance District 11 - 13 23 - 26
where the building specification includes
fully accessible raised floors for data/ City - Secondary - Blackfriars, Aldgate 11 - 13 23 - 26
telecoms cable management, passenger
City Fringe - North/North West - Farringdon, Shoreditch 9 - 12 20 - 24
lift and air conditioning facilities.
GRADE B City Fringe - East - Spitalfields, Aldgate East 10 - 12 23 - 24
Office space that may only incorporate
South Bank - Waterloo, Southwark, London Bridge 9 - 12 21 - 24
under floor or perimeter trunking for
data/telecoms cable management, rather Docklands - Canary Wharf & Crossharbour 12 - 14 24 - 27
than fully accessible raised floors, and/
or air cooling facilities, instead of an air Stratford 10 - 13 24 - 27
conditioning system that dehumidifies,
West End - Central - Mayfair, St James's 9 - 12 20 - 24
filters and draws fresh air into the
building. Grade B space also tends to West End - West - Paddington 9 - 12 20 - 24
be of a generally lower quality
building specification. West End - East - Soho 8 - 12 20 - 24
“REFITTED” West End - North East - Fitzrovia 9 - 12 20 - 24
Office space that is ‘as new’, having been
completely refitted throughout, to include West End - North West - Marylebone 9 - 12 20 - 24
new fixtures and fittings to the common
West End - South - Victoria, Westminster 10 - 12 22 - 24
parts and reception area, new building
services – including air conditioning Midtown - West - Bloomsbury 9 - 12 20 - 24
and passenger lift facilities, electrical,
plumbing and lighting systems, and new Midtown - East - Holborn 10 - 12 21 - 24
raised floors, ceilings and sanitary ware.
Midtown - South - Covent Garden 10 - 12 21 - 24
The specification of works will comply
with the latest health and safety and Midtown - North - King's Cross 8 - 11 19 - 23
building regulations and may also include
West London - Hammersmith & White City 10 - 13 22 - 25
re-cladding the exterior of the building.
“REFURBISHED”
Space is defined as office accommodation
TOTAL OFFICE OCCUPANCY COSTS: The Carter Jonas London office
where the landlord has redecorated and occupancy costs map provides a geographical summary of rent,
recarpeted the available office space (but business rates and building service charge costs. If you would like a free
not necessarily the common parts) and copy of the map, please contact a member of our Team.
overhauled, but not renewed, the building
services, such as the air conditioning and
passenger lift facilities. For more data on the Central London office market, office availability, rents and
rent free periods and information on budgeting and planning for a lease renewal,
rent review or office relocation please contact one of the Team.
THE TENANT ADVISORY TEAM
ur tenant representation
O
services include:
• Stay-put/relocate cost appraisals
• Lease and rent review negotiation
• Office search and relocation
management
• Relocation budgeting and planning
• Repairs/dilapidations cost assessment
Greg Carter Michael Pain
and negotiation
Partner Partner, Head of Tenant Advisory
• Building, air conditioning and
020 7518 3303 020 7016 0722
passenger lift surveys
• Business rates analysis and appeal greg.carter@carterjonas.co.uk michael.pain@carterjonas.co.uk
• Service charge audit
• Office fit out procurement and One Chapel Place, London W1G 0BG
project management
Follow us on Twitter,
LinkedIn and Instagram
© Carter Jonas 2018. The information given in this publication is believed to be correct
at the time of going to press. We do not however accept any liability for any decisions
taken following this report. We recommend that professional advice is taken.RESEARCH Guide to Rents & Rent Free Periods Office Occupancy Cost Map Q3 2018
DESPITE BREXIT UNCERTAINTY, LOW VACANCY
ADVISOR’S CONTINUES TO UNDERPIN THE MARKET
What is the London office market like for space in areas with no Elizabeth Line station
tenants at the moment? How is it likely to have remained broadly static during Q3,
develop in the run-up to Brexit and beyond? although rents for second-hand space in
TENANT
These are the two most common, and secondary locations have declined in many
pertinent, questions that I get asked by clients, sub-markets across Central London.
as a property professional specialising in
tenant advisory work. LESS CHOICE & HIGHER RENTS
In a market as diverse and sophisticated FORECAST FROM H1 2020
as the London office market, the answers to
these questions are not clear cut but I will The hiatus in the property development
attempt to simplify them in this commentary. pipeline, precipitated by the Brexit vote,
has resulted in a below trend level of new
RECORD RENTS ACHIEVED NEAR developments reaching the Central London
ELIZABETH LINE STATIONS office market. Supply side constraint are
likely to persist for the next couple of years
Despite the recent disappointing which will result in reduced tenant choice for
announcement that commencement of new and refitted space, placing landlords in
Elizabeth Line / Crossrail services is to be a stronger bargaining position. However, the
delayed at least until the second half of next stock of vacant second-hand, refurbished,
year, this temporary setback is unlikely to dent space is likely to increase one the next
rental growth in those areas of the West End, 12-18 months as tenants trade up into
Midtown, City and City fringe that will have new buildings.
the benefit of an Elizabeth Line station. Providing that there is no hard Brexit, from
The Elizabeth Line represents a major H1 2020 it is quite possible that there will be
infrastructure project that will revolutionise a return of unwelcome rental growth for new
east / west transport connectivity across and refitted office space above 5,000 sq ft in
London. Crossrail has already led to increased some sub-markets, including the West End,
inward investment in the public realm and Midtown and the South Bank where vacancy
new office, retail, leisure and residential levels are particularly low.
development in the vicinity of the various
Crossrail stations. THE SUB-5,000 SQ FT
Office rents for new Grade A space in MARKET / CO-WORKING AND
Elizabeth Line connected locations such as SERVICED OFFICES
Paddington, Bloomsbury and Farringdon have
risen to record levels - from £60.00 - £70.00 There is increasing evidence indicating
per sq ft per annum just before the Brexit vote that the market for office space of sub-5,000
to, typically, £75.00 - £90.00 per sq ft per sq ft, for up to 50 desks, that is available
annum now. on conventional / non serviced leases, is
This trend demonstrates that occupiers suffering - with vacancy increasing and rents
are willing to pay a rental premium for Grade declining in many area of London as the
A space with good accessibility, including a co-working and serviced office sectors
direct link to Heathrow airport and the Thames continue to expand market share.
Valley and Essex labour pools. Gone are the days when businesses that
based themselves in serviced offices were
LOW VACANCY IS stigmatised as being ‘transient’. The advent
UNDERPINNING RENTS of agile working, the emergence of a new
source of demand – the tech / creative
The Elizabeth Line has brought about a shift start-up – and the arrival of a new, smarter,
north in the centre of gravity of the London ‘younger’, class of serviced / co-working
office market, away from more established space provider from America are factors that
markets such as Victoria in the West End, have conspired to underpin the growth in the
Covent Garden in Midtown and London Bridge co-working / serviced office sector.
on the South Bank. However, historically low An increasing number of small and mid-
levels of office vacancy in most size ranges size businesses, typically employing up to
above 5,000 sq ft continue to underpin rents 50 staff – not just from the technology and
in these locations where the influence of creative sectors – are choosing co-working
Crossrail is less powerfully felt. / serviced offices which is a very cash-flow
Michael Pain The Carter Jonas Research Team’s Q3 2018 positive accommodation option. There’s no
Head of Tenant Advisory Team
020 7016 0722 survey of the London office market shows that need to tie up scarce working capital in an
michael.pain@carterjonas.co.uk landlord’s advertised rents for new Grade A expensive fit out and the lease flexibilitythat co-working and serviced office staff – without which the
providers offer is another important productivity and profitability
consideration for fast growing of their businesses will suffer.
businesses. Organisations that better ‘‘ EMPLOYERS
Landlords of ‘conventional’ office understand what motivates ARE BECOMING
space in the sub-5,000 sq ft office the millennial workforce are INCREASINGLY AWARE
market are reacting to this structural focussing more on ‘quality of OF THE IMPORTANCE OF
market change in several ways, space and place’ and less on CREATING AN OFFICE
including reducing rents, offering cost – and they will almost
ENVIRONMENT, AND
longer rent-free periods and more certainly prosper at the
flexible leases or fitting the space expense of those competitors
CULTURE, THAT WILL
out for the tenant and subsidising or who fail to grasp these issues. ATTRACT, AND REINFORCE
rentalising some / all of the cost. Landlords, too, are more THE RETENTION OF, HIGH
However, not all occupiers will alive to the demand for better CALIBRE STAFF – WITHOUT
consider co-working / serviced office build quality and design and WHICH THE PRODUCTIVITY
space. Some businesses in the legal, are developing buildings with AND PROFITABILITY OF
accountancy, IT and financial services occupiers’ ‘wellness’ in mind –
THEIR BUSINESSES
sectors have shied away – citing including features that provide
privacy, data security and branding high levels of natural light,
WILL SUFFER. ”
/ identity issues as reasons to stick better ventilation and high
with the conventional leasing model. water quality.
RECRUITMENT – ‘QUALITY
OF SPACE AND PLACE’
Ten years ago the majority of
office occupiers would have put Table 1
Typical Current & Forecast Rents - New & Refitted Mid-Rise Grade A Space Over
cost at the top of the list of deciding
5,000 Sq Ft
factors when selecting office space.
While cost is undoubtedly still an
important consideration that will
£ per sq ft per annum
influence a business’ relocation
decision, it is highly significant that Location Q3 2018 Q3 2019 Q3 2020
today’s generation of office occupiers Mayfair/St James's - Prime £105.00 £102.50 £102.50
are also placing the quality of the Source: Carter Jonas Research
Marylebone £85.00 £85.00 £87.50
space and the public realm around
the building as being fundamentally Soho £92.50 £92.50 £95.00
important relocation variables. What Fitzrovia £85.00 £85.00 £87.50
has caused this shift in mindset? Victoria £75.00 £75.00 £77.50
Workforce demographics. As time
Paddington £75.00 £75.00 £77.50
passes, the ‘millennial’ generation is
becoming increasingly dominant in Holborn £65.00 £65.00 £67.50
the labour market. Bloomsbury £85.00 £85.00 £87.50
Research shows that in the list of King's Cross £82.50 £82.50 £85.00
‘must-haves’ when job hunting the
Covent Garden £77.50 £75.00 £75.00
typical ‘millennial’ will consider the
Southwark £67.50 £67.50 £70.00
quality of the office environment,
and the vibrancy of the public City Prime £65.00 £62.50 £62.50
realm around the building to be key City Secondary £60.00 £57.50 £57.50
priorities when deciding to apply for Shoreditch £65.00 £62.00 £62.00
/ accept a job.
Farringdon £75.00 £75.00 £77.50
THE LINK BETWEEN REAL Spitalfields £65.00 £62.00 £62.00
ESTATE & PROFITABILITY Aldgate East £55.00 £52.50 £52.50
Hammersmith £57.50 £55.00 £55.00
Employers are becoming
White City £52.50 £50.00 £50.00
increasingly aware of the importance
of creating an office environment, Canary Wharf £50.00 £47.50 £47.50
and culture, that will attract, and Stratford £47.50 £45.50 £46.50
reinforce the retention of, high calibreYou can also read
