The gap in rates between prime West End office space and City offices is now the largest ever, a new study has claimed.
A report from property consultants CB Richard Ellis (CBRE) reveals that the difference in rates is almost 50 per cent – with commercial leases in prime Mayfair and St James locations costing an average of £120 per square foot, compared to £62.50 per square foot in the City of London.
CBRE says that this is because top-end financial firms want to get a prestige address.
"Of the 50 most expensive deals [in this area] between the third quarter of 2006 and the second quarter of 2007, investment managers, private equity firms and hedge funds have accounted for 50 to 60 per cent. They are relatively price insensitive tenants."
"Future trends in top prime West End rents will largely depend on the fortunes of the hedge funds, investment managers and private equity companies that are driving the rents paid in Mayfair and St James’s submarkets.
"A narrowing of City and West End rent differentials is only likely if such tenants become less active or more cost-sensitive in a less profitable business environment," the report continues.