Richard Carr reviews a new development project, which will look to offer affordable office space in the UK’s most prosperous city.
High office space demand
London is the UK’s economic heart with its lucrative finance and technology industries. Figures show that London is one of the largest city-economies in the world, with a gross domestic product (GDP) of £565bn, which is roughly 17% of total UK GDP. Many companies have a base in this prosperous city, making demand for London office space extremely high.
Strong demand has pushed average London office rents to new heights. Prices in premier London commercial locations can be particularly high. According to Business Zone, for instance, the West End has the highest office rental prices in the world, at an average of £100 per square. For many firms, especially smaller enterprises, office space in some parts of London is simply unaffordable.
Affordable office space
The Evening Standard recently reported on a project which is aimed at addressing this issue. Trilogy Property, in partnership with LaSalle Investment Management, will initiate a development which will offer “affordable office rents” at a major new Docklands building, in order to stop younger firms being priced out of the city.
Trilogy Property and LaSalle Investment Management recently showcased the initial proposals for the mega 600,000 square feet campus to be called ‘Republic,’ located in the East India docks. Once the project has received planning permission, the first phase should be completed in 2017. Real estate agents Allsop and CBRE have been tasked with sourcing tenants for this office space.
Trilogy Property boss Robert Wolstenholme said that early lettings would see tenants benefit from rents of less than £5 per square foot. This represents a discount of roughly 50% and at least 65% on the City and West End office rental values respectively. Commenting, he said: “There’s a war for talent in London, and we want to make sure it’s ‘priced in’ rather than priced out as we are hearing about some start-ups and major corporates thinking it is too expensive to work here.”
Wise investment strategy?
Richard Carr believes the project could serve as a wise investment strategy for Trilogy Property. With average office rents continuing to climb in London, especially in prime boroughs, many smaller companies are beginning to be priced out of the UK capital. These companies are likely to jump at the chance of securing cost effective office space in a prime location, ensuring the development will have a steady stream of tenants and potentially allowing Trilogy Property to accrue a healthy return on investment.