British Land's annoucement today that it has let a further one and a half floors of it's West End office development at 10 Portman Square to the UK affiliate of Aramco, the Saudi oil company, at a headline rent of £92psf on a 15 year lease with no breaks, just a week after Aspect Capital took two floors of the eight floor building, confirms the West End as the premier market in the UK.
There is strong investor and occupier demand, yet relatively the pipeline for new space is weak. The total take up of space in the West End is running at 4 million sq ft a year, yet in 2014 the scheduled pipeline will only produce 418,000 sq ft.
Occupier demand is coming from the Technology, Media and Telecoms (TMT) sector in particular, and there are currently more than 500,000 sq ft of space requirements from TMT occupiers being negotiated.
West End capital values have now recovered almost all of the 42% peak to trough fall which occurred between 2007-8, being only 16% off that peak as a wall of overseas money, now accounting for 62% of the recent purchases, hits us from investors who consider the UK a "safe haven", and West End property an attractive store of wealth in a world of increasing price inflation. More than £3 billion of office property in the West End has changed hands this year.
Investment Managers meeting at the annual 2 day IPD/IPF Conference in Brighton heard from several speakers that the UK will remain an attractive market for real estate investment for the forseeable future, and that London's status as the global capital, will ensure demand from tourists and investors will continue to underpin the national demand.