The London Space Race
17 October 2014 by James Bird
Home to 100 of the top 250 companies with global or regional headquarters in Europe, London is the most expensive place for office space in the world. London’s West End has been crowned the most expensive location for office space for a second year running, with prices 14% higher than those of the runner up – Hong Kong. It is no surprise that one reason for this is that the demand for office space is much higher than its supply.
Office based employment has seen an increase in 7% and with no signs of this slowing down anytime soon, the pressure for office space is mounting and the cost of rent is soaring. To make matters worse, the office space actually available to businesses has fallen. The amount of Central London office space which is on the market has fallen by 20% in the last year alone. It is believed overall that the amount of office available is at the lowest it has been for over 6 years now. Clearly something needs to be done to meet the ever rising demand of the city.
Fortunately, 2014 has been able to witness the arrival of some new office spaces. Once there were signs of economic recovery in 2011/12, developers saw this as an opportunity to start work on their investments. Many of these buildings should soon be completed which means there will no doubt be a free for all to claim the new areas. It is believed that 7 million sq ft of new office space will have been completed by the end of this year, the highest since 2003, but this still won’t be enough. 20 Fenchurch Street (or more commonly known as the “Walkie Talkie”) had already made arrangements for 87% of its office space before it had even been completed. Meanwhile Ernst & Young have made a deal for 205,000 sq ft of prime space at 25 Churchill Place in Canary Wharf. Again this building hasn’t even finished construction yet.
Developers are moving fast to try and accommodate the demand. The current owners of Canary Wharf, Songbird Estates, are amongst them. After recently exchanging contracts to sell 50 Bank Street to Hong Kong investors for £153.5m, Songbird has been granted planning permission to begin construction of 30 new buildings, with a 57 storey cylindrical residential skyscraper at its centre. Work on this is expected to commence Autumn this year with completion anticipated for 2018.
With the fight for prime office space ongoing, many are starting to look further afield and locate out of the city centre. Developers have no doubt realised this and will be looking to construct new space outside of the central areas along routes with the best transport links. However, given that London is seen as the commercial centre of Europe, will we ever be able to fulfil the demand for space?