West End faces office supply crunch as back to work demand picks up
Central London, particularly the West-End, is facing an office space supply crunch as demand for in person working picks up, property investment trust Derwent London has said.
According to reports in its half year results, the listed business described the West-End as “very tight” with only 3.8 per cent of vacancy levels on office space.
Derwent flagged a lack of office space arriving on the market, potentially pushing rents up on the prime space desired by firms.
This is compared to the City with 11.7 per cent and the Docklands at 14.3 per cent vacancy levels.
It comes as companies are encouraging workers to return to working in the office more frequently as the pandemic created a trend of hybrid and remote working for professionals.
Derwent, which owns 5.5 million sq ft of commercial real estate, said that pre-letting levels across central London are high at 45 per cent as companies with larger requirements increasingly “recognise the forthcoming lack of prime supply, particularly in central locations”.
“Although availability across central London is elevated, supply of the best space is constrained, particularly in the West End,” Paul Williams, chief of Derwent, said.
“The medium-term speculative development pipeline looks thin with some new starts being delayed. Take-up was lower in H1, but we are encouraged by the increased amount of space under offer and levels of active demand.”
It comes as the business revealed its earning for the half year completing £26m of new leases in 2023 to date, a near record level.
“We delivered our second highest H1 lettings on record with momentum maintained into the second half as businesses continue to commit to our distinctive central London buildings and brand,” Williams added.
“With our strong balance sheet, we are well-positioned with the right product and pipeline to capture London’s diverse demand, despite the uncertain economic outlook.”