A Tale of Two Cities

The office space market in London is becoming ever more divided between the very different state of affairs in the main financial district of the capital, which is facing higher vacancy rates and falling rents, and the West End of London, which is experiencing the exact opposite with stable vacancies and rents that are highly anticipated to begin steadily rising over the course of the next few months.

The reasons for the difference between the two areas are many, but among the most notable are down to declining demand due to a contraction in the financial services industry along with new developments in the ranks of available office space in the city, while the West End is benefitting from a more diverse mix of tenants, including internet and media firms.

The West End of London is also expected to benefit from such firms as Derwent London PLC, Land Securities, and Great Portland Estates PLC, all of which own a large amount of the office space in the area. The city experienced a recent upturn in rents but a potential oversupply of new office space, coupled with anticipated job losses, has seen the market begin to rapidly lose momentum, with office rents expected to fall to as little as £38 per square foot according to analysts from JP Morgan Chase.

“The finance industry appears unlikely to require new net space over the next three to five years… the city’s propensity to add new office space is excessive,” says the head and managing director of the London office of Green Streets Advisors, John Lutzius.

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