Since the end of the recession the commercial property market has come on in leaps and bounds with high demand across key economic regions yielding strong results for landlords and property agents. However, as this demand nears its peak smaller businesses are often finding themselves unable to compete with larger companies in terms of rents, meaning they are becoming pushed out of pivotal locations.Yet this is not the only factor standing in the way of small business growth, as Britain’s strengthening residential property market has seen the supply of commercial property in popular areas dwindle.
The West End of London is one key area in which the housing boom has caused issues for businesses, with many SMEs being squeezed out of the region due to a simple lack of available commercial property.
According to a survey, conducted by leading London commercial agents DeVono Property, new office projects and other commercial developments are being neglected by developers keen to capitalise on the popularity of the residential market.
Furthermore, the number of existing companies choosing to expand in the area is further depleting the supply, meaning that new start-ups and smaller firms are being forced to search for property outside their desired postcode. Even larger, more established firms are struggling to grow their West End office bases, with fashion brands such as Alexander McQueen, Agent Provocateur and Esprit all moving to the eastern edge of London as a result of the low West End supply.
Property director at DeVono, Adam Landau, believes that smaller firms have been particularly affected by rising costs as a result of the high demand.
He says; “Businesses struggle to get into West End streets where there might have traditionally been a ready supply.
“Many SMEs are now settling for fringe locations such as Holborn, Clerkenwell and Shoreditch as a result of this and the increase in occupier costs.”
DeVono’s survey found that areas in which large scale residential developments are currently underway, such as Great Portland Street, Marble Arch and the fringes of Covent Garden and Soho, have particularly high levels of demand with businesses seeking to expand. Yet the stalling of commercial developments such as 100 Bishopsgate and the Pinnacle by Liverpool Street has pushed supply to its limits in these areas too.
With London leading the way out of recession – in terms of business start-ups and job creation – SMEs being forced out of key areas by a residential boom appears to be problem developers must address to help maintain the momentum of economic recovery.
