Prime rental prices fall as hedge funds start to haggle

Prime rental prices fall as hedge funds start to haggle




.

In those heady BC (before crunch) days, hedge fund managers would think nothing of peeling £100 from their rolls of money for the rent on each square foot on some spectacular office space in The Right Part of Town. 

Leaving the hustle and bustle of the City to move closer to affluent clients in Mayfair and St James’s was simply a sign of the times, outbidding other companies was normal and overpaying, well, why not? They could afford to.

 

Flash forward to the present and 66 funds at 108 companies have gone bust in the last two years. The last was the self-confessed “giant Ponzi scheme”, Bernard L Madoff Investment Securities. Oh yes, the good days are well and truly over.

 

Now that their rolls of money have shrunk from the size of a cow to the size of a tin of corned beef, these rattled hedge funds have decided that perhaps it’s a good idea to scale down, find a more modest space or start to haggle a little bit over rental prices.

 

This has led to rents on office space falling by 29% during the last year in prime areas, according to property consultant NB Real Estate. The rents once branded “eye-popping” have now slumped further than in any other area of London.

 

Office rents have plunged from £120 per square foot at the end of 2007 to £85 at the end of last year as the average hedge fund recorded losses of 18.3% for the full year.

 

A director at NB Real Estate, James Gillett revealed that many are “putting stuff up for sale and a number are subletting to keep costs down.”

 

Rental prices in The City have also dropped, but only by 19% from £65 per square foot to £52.60 over the last year.

 

Mr Gillett divulged that: “Pendragon has been trying to dispose of 5,500 square feet on Berkeley Square, while Endeavour is trying to sublet 5,000 square feet on Mount Street. Eagle House let a floor on Jermyn Street in June for £102 a square foot and now another floor has come up, which is going for £85 a square foot.”

 

According to property experts, the sharp rental correction will work wonders for bringing new tenants into the formerly exclusive market.  

Leave a comment