Leading property experts predict West End rent spike in 18 months

NAI Haywards, the property experts specialising in supporting business occupiers, has issued a warning that the West End office rents could spike in 18 month’s time.  This may create a “perfect storm” for many media companies who are already facing a squeeze on margins.

West End office vacancy rates are under 6.0% with some submarkets being as low as 3%.  The result – office rents have risen sharply and incentive packages have fallen.

Looking out 12-18 months, there is little on the property horizon that will change.  Office supply will not increase dramatically over this period.  Occupier demand, measured in terms of take up of space whilst low, is sufficient to keep pushing rents upwards, particularly for flexible, air-conditioned office space.
 

How will this predicted rent spike affect media businesses?  For those, who leased offices in 2009 (i.e. the lowest point of the rent curve in recent years), many will be facing a lease event (an expiry, break option or rent review) in 2014.  This group is could see rent increases of up to 80%.  For those that signed leases a year earlier in 2008 should still expect increases, but they will be lower.

If you then add the other property cost increases such as rates, increasing service charge costs, higher energy costs; and the Crossrail levy, many companies could well see their margins badly affected.  The table below sets out the typical forecasted cost increases:-
 

 

2008

2011

2013

Typical Increase

Total occupancy cost £ psf pa

£48.00

£60.00

£70.00

£22 psf pa

20 head company (say 2,000 sq ft)

£96,000

£120,000

£140,000

£44,000 pa

50 head company (say 5,000 sq ft)

£240,000

£300,000

£350,000

£110,000 pa
 


The revenue implications to cover these increased costs are significant and may well be beyond many businesses unless they have planned for the increases.

Speaking about cost pressures on the membership, Francis Ingham, Chief Executive of the PRCA, commented that “Nobody wants surprises like this.  NAI Haywards are our property experts and have helped many of our members with their property problems.  They are prepared to provide you with a free initial consultation and have a number of ideas that we know could help your business”.

 

Contact - Iain Rackley

iain.rackley@naihaywards.co.uk

 020 7101 0200

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