London commercial property starts year strong with huge Baker Street let
A British-based property company has fully let a Baker Street office space at a significant premium to the estimated value in an excellent start to the commercial market in 2025.
Derwent London has pre-let 204,300 sq ft of office space to five tenants at its 25 Baker Street W1 development, which will complete later in the year.
“These lettings highlight the strength of demand for high quality, design-led and amenity-rich spaces in the right location with class-leading sustainability credentials,” Derwent said.
The space was sold at a 16.5 per cent premium to the appraisal estimates rental value in a new benchmark for the area, the property firm said. Rents across the building range from £98 to £113 per square foot.
Derwent, which has committed to becoming a net zero carbon business by 2030, owns 63 buildings in a commercial real estate portfolio predominantly in central London valued at
£4.8 billion as of June 30 last year, making it the largest London office-focused real estate investment trust (REIT).
Chief executive of Derwent, Paul Williams, said the rental level demonstrated “positive structural market trends”, and were in part due to a shortage of supply of prime offices across London’s West End.
This shortage can be explained by two trends: the first is changes to energy efficiency requirements in the capital, which will see a majority of office spaces become unlettable by 2027.
This has created a ‘flight-to-quality’, with demand for sustainable, ‘smart’ workplaces the main driver of office take-up in 2024.
Secondly, firms have increasingly begun to order staff back to the office. Earlier this week, FTSE 100 ad giant WPP became the latest company to do so, ordering employees into work four days a week.
The trend is set to boost demand for commercial office space in the capital and is likely to even reverse the downsizing trend which has dominated the post-pandemic market.
Derwent has also acquired full ownership of the adjacent, 240,000 sq ft, 50 Baker Street W1. It said its “next phase” of West End developments totals 0.5m sq ft across three projects.