BNP Paribas Real Estate’s own West End office data reveals the rate of deals to number of inspections has increased by 40% in H2 2022 versus H1 2019. The speed of space let has increased by 25%
According to initial data, Q2 2022 saw a 62% increase in office demand, with take-up reaching 1.21m sq ft across 164 deals in total, with Banking & Finance (36%), Media & Tech (15%), Professional Services (16%) and confidential/undisclosed tenants (23%)
52% of take-up this quarter has been for Grade A space which equates to a Grade A vacancy of 1.73%
Market competition has driven average prime office rents in Q2 2022 versus Q1 2022 in Mayfair & St James (+8.33%). West End prime rent currently sits at £130 per sq ft in Q2 2022
Supply in Q2 has reduced in the West End market by 11%. This is due to the 62% uptick in take-up in Q2. Supply excluding flex workspace providers has decreased to 3.26m sq ft, equalling to a vacancy rate of 5.3%
Why is this interesting? Since March 2020, there has been much speculation on the future of the office, but the market has been waiting for tangible evidence/data to support what role the workplace would take.
Figures tell us that despite hybrid working reducing physical occupancy levels, the market remains competitive for large prime Grade A space.
Simon Knights, Head of West End Agency, compares the shift to when flagship retail stores became used as a means to project brand values and experiences rather than to simply sell product. Profitability was less of a concern, and visibility more important.
The similar can be said of West End offices. Physical vacancy is less important, and the office environment has taken on a more experiential role for the benefit of brand and consumers; employees, clients etc.
Simon Knights, Head of West End Agency at BNP Paribas Real Estate commented: “I am so bored of reading figures recording that return to the office physical occupancy is up, down, or whatever. Are all business sectors performing the same? Are all locations and buildings similar? Absolutely not, and our figures show there are so many more important discussions to be had rather than asking how full an office building is. The office sector is not toast, it has simply evolved beyond its existing primary function.
“The individualism of occupiers is really important – they care about their employees’ quality of life and the perception of their brand, of which the office is a reflection of. This is fuelling the migration and competition from many occupiers to secure top specified office buildings, making this market extremely hot right now. It’s not a one size fits all approach of course but we are certainly picking up on this more and more.”