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CoStar Analysis: Spotlight on Covent Garden

By Mark Stansfield - Thursday, October 12, 2017 14:04

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Red Bull’s acquisition of 37,000 sq ft of office space at Seven Dials Warehouse, as reported by CoStar News yesterday, was the latest in a series of positive stories emanating from London’s Covent Garden submarket.

The Red Bull letting was one of eight deals above 30,000 sq ft to have been agreed in Covent Garden since the EU referendum last June. This is the most of any West End or Midtown submarket. It is also a higher number than in the City Core North and City Core East submarkets, where such deals have historically been more prevalent.

Demand in Covent Garden is being driven by firms from a variety of industries, many of whom are moving from submarkets further west in search of either cheaper rents or larger, better offices. Notable recent examples include Spotify expanding into 104,135 sq ft at the Adelphi building (a move from Argyll Street in Soho), COS leasing 60,095 sq ft at 1 New Oxford Street (another move from Soho), and McKinsey & Co pre-letting 97,500 sq ft at the Post Building (a move from St James’s). Conde Nast, the Economist Group and PetroChina International have also recently signed deals to move to the Adelphi from other West End submarkets. But the largest office deal in Covent Garden in the post-referendum period was by co-working specialist WeWork, which took 140,000 sq ft at 125 Shaftesbury Avenue in June 2017.

Robust demand, in addition to the conversion of some buildings to residential (Centre Point tower was by far the largest example), have brought about a sharp drop in Covent Garden’s office vacancy rate over the last couple of years.

However, despite such positive momentum, average rental growth has finally flattened off in Covent Garden after several strong years, as in many submarkets across London.

CoStar’s latest Covent Garden office submarket report can be found here.

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