ECONOMICS

Economics

Question # 1

Office Rents in London's West End

London with the West End has become the City with the highest rental rates in the world, ahead of the central district of Hong Kong, for the first time since 2008. Moreover, London's West End remains the most expensive office district in Europe, the second year in a row (Business Source Complete, 2011). There has been a steady increase in interest rates due to a lack of office space and the relentless demand, especially from companies in the technology sector, which has resulted in increased competition for available office space. Rates rose by the end of 2012, and London is the most expensive office markets not only in Europe but also for the first time since 2008, the most expensive office market in the world.

Commercial Spaces - Offices and Shops

Offices for rent in West End London are a prime location and have an ever growing demand. According to forecasts of CBRE, the number of white collar in this part of the British capital will grow annually by 1.5%. Moreover, according to CBRE, in 2012, investors poured into the offices of West End London £ 14 billion (55% more than in 2011). Furthermore, it is in the midst of the financial crisis in Europe. Around 67% of the investments accounted for foreigners. In this regards, according to CBRE, among foreign investors dominate the citizens of Asia (24%), buyers from mainland Europe (16%), the U.S. (13%) and Germany (8%) and is considered as the most foreign capital attracted City (81% of total investments).

Funds and private buyers from the U.S., Germany and Asia gain massively in West End London. Many commercial sites in this part of town are sold leasehold for a short time; in most cases it is not clear to the customers (Stevens, 2008). They are willing to buy the freehold or long leasehold in the heart for the same amount as residential real estate, therefore; most likely, this is reflected in the lack of interest in commercial real estate. According to such facts, buying commercial property in West End London turns into a stable and profitable business. This is further taken considerations due to such reasons:

Less than the purchase of property acquisition costs (lower stamp duty for the land);

Lease term is for a long time, so for an average of 10 years to be bringing a steady income.

The commercial facility management requires greater investor participation and time.

Offices in the West End are in demand, especially from the IT-companies and representatives of the media industry, as well as banks, industries and different companies are in the popular areas such as Oxford Street North West, the North Mayfair, and Oxford Street East.

According to forecasts of CBRE, office rental in 2013 will grow by 2% in 2014 and even more, which is due to the shortage of supply in West End. In regards to capitalizing on the demand in the area new high-quality projects are expected near London Bridge and Waterloo ...