Over the last three years we have seen record levels of space taken by serviced office providers across London's West End, with 2.3million sq ft let to the sector across 77 transactions.

The increased amount of serviced office space across central London as a whole has undoubtedly had an impact on the number of sub 5,000 sq ft transactions in the West End, which were down 36 per cent on the long-term average at the end of the first half of this year.

While most sub-markets have experienced a fall in the number of sub 5,000 transactions over the last couple of years, Soho has bucked the trend and transactions of this size hit a record level in 2018.

The resilience of the sub-market can be attributed in part to the continued strong appetite from its core tenant base, the tech and media sector. Over the last 20 years, the sector has accounted for over 40 per cent of the space taken and, more recently, a third of transactions completed.

While Soho's main tenant base remains strong, the spectrum of sectors it appeals to has also continued to broaden. We have seen financial firms such as Meyer Bergman, Horsley Bridge and OakNorth move to the area, having previously occupied space in locations like Mayfair.

Strong occupational demand has seen rental growth over the last 10 years in Soho outpace neighbouring sub-markets Mayfair, St James’s and Covent Garden. The average Grade A rent for traditional office space in Soho, having risen by 42 per cent over the past five years, is now £84.54 per sq ft, with further year-on-year average annual rental growth of 2.7 per cent expected.

The continued popularity of Soho has kept the vacancy rate below 4 per cent for the last five years. At present, there is only around 130,000 sq ft of grade A space available, with just 11 floorplates over 5,000 sq ft.  Development activity in Soho has been limited since 2014 onwards and, while this is set to peak over the next four years with 830,500 sq ft of newly developed or refurbished space set to be delivered, already just under one third of this space has been pre-let.

Overall, the resilience of Soho has been underpinned by occupiers viewing it favourably for attracting and retaining talent. This is due to a combination of factors including convenience and strong transport links as well as its general perception to occupiers of being a relatively contemporary location.

These factors will continue to attract occupiers to the area and drive rental growth, which is already outpacing other sub-markets across central London.

Further information

Read more: West End Office Market Watch