West End rents fall by a third in a year

3 July 2009

Rents in London’s West End have fallen by more than a third in the last year as the financial crisis takes its toll on the hedge fund industry which played such a big role in pushing prices high.

According to figures obtained by FM World from property firm King Sturge LLP, prime West End rents have fallen to £70 per sq ft, a 36 per cent fall in the last year. Rents in Mayfair and St James Park have now been declining for 24 consecutive months.

Activity did pick up in the second quarter of the year with 330,000 sq ft let, an increase of 15 per cent on the first quarter. But the total for the year-to-date of 618,000 sq ft means that it is still likely that 2009 will be the worst year on record for rental activity.

In contrast, greenshoots are in evidence in the City property market. King Sturge reports a strong upturn in enquiries and says that potential occupiers are “serious” about property deals, not simply looking for information to use as leverage against existing landlords.

Letting activity increased by 100 per cent on quarter one with 600,000 sq ft let. King Sturge believes that there is now a “price is right” sentiment when it comes to City property. This is reflected in the slowing rate of rent falls. Prime rents now stand at £44 per sq ft, down 5.3 per cent on the first quarter. Between the fourth quarter of 2008 and first quarter of 2009, average rent fell by 14.6 per cent.

In spite of the improvement the 900,000 sq ft which has been let in the first six months of the year represents only half of the floor space which had been let at this stage last year.