While the true impact of leaving the EU will become clear in due course, uncertainty remains the dominant feeling within the current UK commercial property market. However, market confidence appears to have improved following the post-vote political upheaval. A reduction in interest rates have had a somewhat stabilising effect on the pound and reassured the markets; fending off the risk of any potential recession.
As London’s occupier markets are coupled to the long-term prospects of the UK economy, the implications of the post-referendum property market are still developing. There has certainly been evidence of interruptions and delays of development schemes, but there was equal proof of deal continuity. Several high profile pre-negotiated deals took place in July 2016 (Ocado, Amazon and Wells Fargo), emphasising the London occupier market appears to retain its appetite for space.
Media reporting suggesting a mass-migration of companies vacating London for the EU to ensure ‘passporting rights’ may have been exaggerated and premature, but we are finding an upsurge in lease renewals with several international clients advising they are placing new investment in the UK on hold. There has been a marginal decrease in London’s grade A and B City prices due in part to uncertainty, which has also resulted in a number of new developments going on hold. However, it’s likely that we will see a recovery in prices as development gets back underway and more office space becomes available.
|Borough||Grade A Rent||Grade B Rent|
|Knightbridge||£85 - £95||£55 - £60|
|Hammersmith||£55 - £60||£45 - £50|
|Chiswick||£45 - £55||£40 - £50|
|St. James||£110 - £120||£70 - £90|
|Victoria||£70 - £75||£55 - £63.50|
|Mayfair||£110 - £120||£70 - £90|
|Paddington||£55 - £65||£40 - £55|
|Midtown West||£65 - £77.50||£50 - £65|
|Soho||£70 - £90||£65 - £70|
|North Oxford St East||£80 - £90||£60 - £65|
|North Oxford St West||£80 - £90||£60 - £65|
|Kings Cross||£77 - £85||£60 - £75|
|Southbank||£60 - £65||£65 - £75|
|City||£68.50 - £72.50||£52.50 - £60|
|Stratford||£40 - £50||£35 - £45|
|Canary Wharf||£40 - £50||£35 - £50|
|Midtown East||£65 - £70||£45 - £55|
|Euston||£72.50 - £77.50||£55 - £60|
Average 2017 Office Rental Costs based on Grade A newly refurbished space & Grade B space
(£ High - £ Low per sq ft per annum)
The economic uncertainty in the wake of the referendum has generated caution and attention in the UK market which has been most prominent in London. Occupiers are still assessing the impact and their future business plans, and are likely to demand greater flexibility when signing leases. We can expect rents to continue rising, and further delays in new property developments.
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