St James’s continues to outperform the market for exceptional space. The top three floors at the Smithson Plaza (formally the Economist Tower) which has been extensively refurbished and has exceptional 360° views over central London are rumoured to be under offer at a rent in excess of £150 per sq. ft.
Against a background of uncertainty, the West End office market performed relatively well during 2017 with a record take-up of 4.2 Million sq ft. With a distinct lack of new stock coming to the market during Q4, rents have held up well, although rent free periods have moved out further. The serviced office sector accounted for 22% of take-up.
St James's continues to command the most expensive office rents within the UK. Exceptional deals continue to complete, such as the fashion tycoon Lawrence Stroll paying £190 per sq ft at 5 St James's Square. Although this does not accurately represent the level of deals being achieved in St James's with more representative deals being agreed between £95 - £105 per sq ft in the sub 5,000 sq ft sector.
2017 is set to be an uncertain year for the St James's office market with BREXIT still not determined and Business Rates changing in April. This will be good news for tenants, with increased incentives being offered by Landlords and quoting rents likely to soften as part of a general market shift.
Over the past two quarters, the office sector has certainly seen a slow-down from the strong growth experienced during 2015. The hot topic of discussion within the property sector is whether this slow-down is a result of BREXIT uncertainty or is evidence of a more general slow-down in the commercial property market cycle.
Over the past six months, rents have continued to increase in St James's with 7,116 sq ft on the 1st ﬂoor of 8 St James's Square letting at £147.50 per sq ft, whilst 4,000 sq ft on the 2nd ﬂoor has let at £157.00 per sq ft. At 3 St James's Square, several small suites have now been let including 1,850 sq ft on the 8th ﬂoor at a rent of £160.00 per sq ft.
Rental growth over the past six months has been strongest in St James's, where new record rents have been achieved in excess of £150 per sq ft. However, the transactions reported at 8 St James's Square are not representative of the market as a whole in St James's and more realistic rents being achieved for Grade A accommodation range from £95 - £115 per sq ft.
Supply in St James's during 2014 remained critically low at approximately 2.5% which, coupled with strong demand led to sustained rental growth. Several transactions showed rents for prime Grade A accommodation in excess of £100 per sq ft,with banking and financial occupiers being the most active sector.