Property developer Landsec reported strong demand for premium office space in central London, as firms react to the message of interest rates being “higher for longer.”
The commercial real estate giant said office occupancy in Victoria, where half of its central London business sits, is now 100 per cent let and with £17m of lettings across its portfolio currently signed or in solicitors’ hands.
Landsec, which owns the landmark office and retail drag Cardinal Place, said that rents in the best-in-class office space are continuing to grow.
Its N2 development in Victoria, spanning 160,000 sq ft of office space, is now also 80 per cent let with the remaining 20 per cent in solicitors’ hands.
Mark Allan, Landsec’s chief executive, said: “Over the past year, we have been decisive in positioning the business for a higher for longer interest rate environment.
“Our disposal of £2.2bn of mature, mostly single-let offices, predominantly in the City, before the start of this financial year has proven very timely.
He added: “As such, we have flexibility to respond to the opportunities that will start to arise from the adjustment to a higher rate reality, as it remains clear that customer demand for the most sustainable, high-quality space in the best locations remains resilient.”
It comes amid a challenging period for the office market, with many commercial developers battling a slow down in demand and price following a push to homeworking post pandemic.
As employees continue to split their working week between home and the office, many businesses no longer require such a large space.
Retailer John Lewis said in April that it would slash the size of its central London headquarters in Victoria after thousands of its staff looked to lower their presence in the office.
However, for cash-rich businesses, this appears to be less of a problem.
According to a recent study by CBRE, 38 per cent of all central London leasing deals over the past 12 months have transacted at a super-prime level.
Adam Cosgrove, head of West End leasing at CBRE, said:“The super-prime transactions have been driven by demand from occupiers looking to secure the very best space with strong sustainability credentials.”
“We are also seeing a far greater spread of rents being secured within buildings with the highest rents being achieved on the stand-out floors, often benefitting from access to private terraces and high-quality amenity space.”