Guest Blog: Steve Baker, MD, Ventia
This month Steve Baker, managing director of serviced office provider Ventia Ltd, looks at how office to residential conversions in the West End are affecting the SME office market
The trend for converting offices to residential has accelerated considerably over the last 18 months. In 2011, 600,000 sq ft of offices were converted to residential. Many of these conversions are period buildings housing small and medium sized businesses.
Research from London-based property firm HS2O shows that in 2011 planning applications for these conversions increased by 53%. This growth has been mainly driven by the sky-high prices being achieved for residential property.
We are now starting to see a similar trend with more recently developed offices; generally much bigger floor plates and housing large businesses, these buildings are also being considered for redevelopment as the returns offered are compelling.
The net effect of these conversions are that small companies in particular have a limited choice of office locations in core West End locations, especially in St James and Mayfair. Rents are being pushed upwards, and with a limited amount of new office development in the pipeline, they will continue to edge-up as this trend continues.
It will change the dynamics of the West End and businesses will be forced to locate elsewhere in Central London.
The serviced office sector has remained resilient and seen negligible impact since the downturn started in 2008. Strong demand and high occupancy levels across the West End in the last three to four years is due in part to the forced relocation of SME businesses as building owners choose not to renew leases, and also due to the uncertain future faced by many SME companies trading in an economy which still offers no long-term certainty.