Mayfair office market squeeze spawns new central London hot spots
Mayfair and St James's just aren't big enough for all the companies that want a piece of London's most expensive neighbourhoods. Many are now settling for less prestigious city centre addresses, creating new hot spots in the office market.
Buildings are sprouting up in once rundown Victoria and King's Cross, a former red-light district, as developers expand the area that commands the world's highest office rents. The Blackstone Group bought a property just under a kilometre from St James's Square to profit from a squeeze caused by conversions of offices into luxury homes. Land Securities Group is investing £2 billion (HK$24.8 billion) in Victoria.
The construction push comes as older workplaces in St James's and Mayfair, many built as town houses, are turned back into homes to profit from soaring prices. Hedge funds and private-equity firms are taking most of what's left, accounting for 55 per cent of new office leases in the districts this year, commercial real estate brokers Cushman and Wakefield said.
"When you see occupiers becoming more transient because of that lack of supply, it creates opportunities on the fringe of historic prime areas to drive exponential rent growth," said James Lock, managing director of Blackstone's real estate unit.
While there are no precise boundaries for the West End, it's usually considered the central business area west of the City of London financial district. It includes the neighbourhoods of Mayfair, Soho and St James's and tourist attractions such as Buckingham Palace, the theatre district and the bustling Piccadilly Circus commercial intersection.
Developers are seeking to exploit demand for larger and more modern offices in central London with access to transport links. Rents are rising throughout the West End's fringes.