Rent for prime office space in London’s West End has dropped by almost 30 percent as the hedge fund bubble bursts in the capital.
A report from property consultancy NB Real Estate suggests that rents on West End office space has fallen by almost a third from its high. At it’s peak in 2007, office space in London’s West End hit around £120 per square foot, that figure dropped to around £85 per square foot for West End office space at the start of this year, reflecting the collapsing hedge fund industry.
In the months leading up to the current economic downturn, office space rents in London’s West End soared as the competition for prime office space heated up. In what are now considered the boom years, London’s hedge fund managers and private equity managers were free to splash their cash on grade an office space in areas like Mayfair and St James.
In the summer of 2007 a record office space rent of £140 per square foot was paid for number 12 St James Square by investment managers Peal Investment. NB Real Estates report points out that at the same time other fund managers were making staggering rent deals for luxurious office spaces, including Warburg Pincus and GLG Partners whose office space deals both came in at more than £100 per square foot.
NB’s report states that the struggling hedge fund industry has directly and dramatically impacted the office space industry in London’s West End. Furthermore the report suggests that the bank balances of office space landlords will continue to suffer as a result of turning to money-losing incentives like long rent-free periods, in order to fill vacant office space.
Tags: NB Real Estate