London’s St James’s office market will retain a degree of immunity to the global economic crisis, bolstered by the hedge fund and financial firms that are still making money, Atisreal has said.
A lack of supply and the prime location also contribute to keeping rents stable and vacancy rates low, the consultancy’s St James office report said.
‘Despite the recent turmoil in the financial markets, the St. James's office market is still bearing up relatively well, particularly as there are still some hedge funds and niche financial players making money, some of which have active requirements for space in the area, albeit for small units,’ said Mark Hickmott, director of West End agency at Atisreal.
The report said 650,000 sq ft of office space in St James's is subject to lease breaks or expiries in the next three years, but forecasts that most occupiers will remain in occupation or renew their leases.
Banking and finance companies have been responsible for over 75% of space let in the last 12 months and the report predicts them to dominate the market.
The report says investors are still active in the St James market but are being more selective about what they buy.
‘The overall transaction volume for St James is down by about 50%, and this is being propped up by overseas investors’ demand for trophy buildings,’ said Gregor Wallace, associate director of West End investment. ‘However, the West End market is now witnessing the same issues as other sectors of the market: namely that vendors price aspirations are still out of kilter with buyers’ opinions.’
Around £85m was spent on St James's offices in the first half of 2008 compared with a total £330m over 2007.
There are five building currently on the market in the area totalling £238m.