PE Tech Report


Like this article?

Sign up to our free newsletter

Private equity and hedge fund firms continue to dominate financial services London office take-up

Hedge fund and private equity firms are dominating office leasing in core areas of London among the financial services sector (excluding banks), with latest figures revealing strong demand, according to research out from Cushman & Wakefield.

In the first quarter of this year, take-up of office space from non-banking financial services firms  was around 240,000 sq ft with hedge funds accounting for approximately a quarter (23 per cent) and private equity nearly a fifth (18 per cent). These figures are slightly down on overall comparisons to 2015, which was an extremely buoyant period for financial services companies according to the research.
For example, data shows that in the West End alone in 2015, there was an overall 53 per cent increase in take-up from non-banking financial services firms last year to 803, 676 sq ft, compared to 525,457 sq ft in 2014. Private equity firms in particular increased their office footprint, accounting for 30 per cent of deals completed with hedge fund occupiers close-behind on 21 per cent. Other active subsectors included wealth managers (14 per cent), fund managers (13 per cent), investment managers (13 per cent) and financial advisors (9 per cent).
In Central London, take-up increased by 10 per cent to 1,772,464 sq ft last year,  which compares to 1,608,273 sq ft in the previous 12 months. Reflecting a shift away from the City and East London, there was a 13 per cent decrease in these areas in 2015 (882,049 sq ft) compared to 2014 (1,015,831 sq ft).
Andy Tyler (pictured), Cushman & Wakefield’s Head of West End Office Agency, says: “Last year, was undoubtedly a very positive year for the financial services sector from a real estate perspective in key parts of London.
“In the West End, the uptick in activity from financial services firms was particularly noticeable. The amount of space leased by private equity firms and hedge funds has increased year-on-year since 2011 and accounts for an increasing proportion of total banking and financial services take-up. The traditional focus has been around core Mayfair areas – and that still retains an unwavering cachet for many firms – but increasingly others are prepared to look beyond to get the office space that suits them.
“It remains to be seen whether, the market continues to be as buoyant this year. There is a degree of caution at present and we are seeing prospective occupiers take a pause and await the outcome of factors such as the Brexit vote. As such, we would anticipate a slower second quarter. However, the supply shortages remain in the market and I would anticipate accelerated uptake in the second half of the year.”
The research shows that the largest deal in 2015 involving non-banking financial services firms was by hedge fund Marshall Wace, which took 43,000 sq ft in Knightsbridge.

Elaine Rossall, Cushman & Wakefield’s Head of Central London Research, says: “Financial occupiers continue to pay some of the highest rents across Central London. However, there is an increasing trend of cost-conscious financial occupiers seeking better value for money, perhaps by locating outside of core West End submarkets. This change could be for many reasons, although the increasing costs of regulation may well be a contributing factor. There is also an employment perspective as well which will impact the different parts of the financial services sector in a number of ways. For example, in the banking sector particularly, recruitment will be driven primarily by a need for companies to boost capabilities in the areas of compliance and governance and this could have an impact of office locations.”

Like this article? Sign up to our free newsletter