A company's office building is shown at Canary Wharf in London, England, where much of the city's finance industry is located. Picture: 123RF/ MELINDA NAGYThe best new office buildings in London are commanding near record rents and prices during the pandemic; everything else, not so much.
The split can be seen from the City of London to the West End and beyond. Just this week, British Land Co sold its Clarges office and luxury-apartment development overlooking Green Park in upscale Mayfair, at a price more than 7% above its valuation. Yet the landlord’s overall office values declined 3.1% in the six months to the end of September as vacancy rates rose across the city.
The Clarges sale is one of a handful of eye-catching deals in an otherwise grim year for London real estate investment. Investors spent about £4.1bn on London offices in the nine months to end- September, a drop of almost 45% from a year earlier, according to a report from broker Jones Lang LaSalle. This shortage of supply has helped spur a slew of big leasing deals by companies including Netflix and law firm Latham & Watkins. Yet new leases overall were down 60% in the first nine months of the year, according to the Jones Lang LaSalle report. The average rent on the best new offices has risen 12% since the onset of the pandemic in March, while declining 9% for second-hand space, the broker’s data show.
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