This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
I read Reuters piece upon how Hollywood is helping London developers derive income from empty office buildings in the City with great interest. Cannon Pace is being used as the backdrop to a new BBC spy drama and the Walbrook building is to feature in the new Johnny English film. With fees rumoured to be between £1,500 and £7,000 per day who can blame a landlord for letting the cameras through the doors whilst tenants are elusive save for developments like Central Saint Giles.
Some landlords of office premises have sought to emulate the retail concept of a “pop up store” and have granted licences of space for short term conference and show facilities. Land Securities recently let London Fashion Week set up the longest catwalk seen in London in its One New Change scheme. With the Olympics and Queen’s Jubilee just a matter of months away demand for temporary space by the world’s press organisations and others must be building and a great opportunity for owners to derive short term income whilst they seek long term tenants.
Over in the West End it appears that the trend for property owners to diversify completely and convert former office space into high end residential premises continues. H2SO estimates that the value for residential use in Mayfair and St James is £3,000 per square foot whilst office space in the same areas is valued at £2,000 per square foot. The most recent example of this has been Grosvenor Group’s conversion of 3-10 Grosvenor Crescent. H2SO estimates that between 2000 and 2010 over 3.2m square feet of office space in the West End was converted to residential use and the planning pipeline suggests that this trend will continue.
In times like these when there appears to be a current surplus of office space across London and a deficit of long term office tenants creative asset management is a skill landlords must seek to embrace; no owner can afford to have an asset producing no income for a prolonged period of time. Short term lettings not only produce income and temporarily relieve ratings liability but serve to keep a property in use and therefore visible. Who knows, these short term tenants might even take the space for a longer term.