Hedge fund managers remain loyal to London's posh Mayfair and St. James environs, despite rising costs and a tight office space market.
“Whilst we believe that hedge funds could become more footloose at some point,” they are loath to leave the U.K. capital's W1 postcode because “moving away might be perceived as a sign of weakness,” according to a report from real estate manager Jones Lang LaSalle IP.
In a recent report about hedge fund office occupancy in their home city, London-based JLL researchers said rental activity by investment managers has picked up in 2013 after several years of subdued activity.
Rental rates for tony addresses such as 23 Savile Row, 5 Hanover Square and Devonshire House, Mayfair Place, range from £105 ($168) to £110 per square foot, JLL's report said.
Mayfair/St. James' office vacancy rate is just 4.8%. And most of the available properties don't meet “a typical hedge fund requirement” generally including 3,000 to 6,000 square feet of new or refurbished space on a single floor; a high-profile location with an “internationally recognized address;” and excellent nearby amenities, JLL said.
Would-be West End hedge fund tenants won't see improvement soon: Only 579,000 square feet of new office space is under construction, JLL's report said.