‘Critical growth hub’: Hedge funds drive demand for office space in London
Over $13.1 trillion (£10.4 trillion) in assets are managed in London, and the capital has remained the world's second-largest centre for hedge funds and private equity firms globally after New York.
Hedge funds, venture capital funds and family offices have continued to flock to London over the past five years as the capital has retained its position at the core of the financial world.
Take-up of commercial office space by these so-called niche financial firms increased by 46 per cent between 2019 and 2023, according to Knight Frank.
Firms in these sectors have leased 6.4m square feet of space since 2019.
“Despite speculation around a mass exodus of niche financial firms post-Brexit and with recent capital market challenges, London is clearly a critical growth hub for the sector,” James Fairweather, Partner at Knight Frank, said.
Over $13.1 trillion (£10.4 trillion) in assets are managed in London, and the capital has remained the world’s second-largest centre for hedge funds and private equity firms globally after New York.
And demand is set to continue. Knight Frank noted hedge funds and venture capital firms have “lease events” occurring across 3m sq ft of office space between now and 2027. Moreover, firms in these sectors are currently on the hunt for over 1m sq ft of space in the capital, according to Knight Frank.
Hedge funds flock to the West End
A total of 70 per cent of the deals completed since 2019 were focused in the West End.
Hedge funds have become as synonymous with Mayfair as bespoke tailoring and luxury shopping in recent decades.
One of the biggest deals in the region was Millennium Management’s prelet of the entirety of 50 Berkeley Street in December 2023. The deal marked a return of Izzy Englander’s multi-strategy hedge fund to the building (it originally left in 2004) where it said it would base its European headquarters.
Other notable agreed hedge fund deals have included Great Hill Partners, which opened an office at Fitzrovia’s 60 Charlotte Street, to serve its regional hub for the UK and Europe, and One Rock Capital Partners, which set up its European HQ at 33 King Street in St. James’s.
Blackstone also publicised plans to move into a new HQ at Berkeley Square in 2028, after doubling its London headcount during the past three years to more than 600 people.
Outside the West End hedge fund enclave, Ken Griffin’s Citadel agreed a deal to take 248,533 sq ft on the edges of the City at 2 Finsbury.
The office market is bouncing back
Hedge funds and private equity funds haven’t are not the only entities looking for more office space in the capital.
Experts have suggested the capital could be set for a period of strong demand for commercial real estate, particularly offices, as companies look for sustainable, high-quality spaces that accommodate flexible working.
Savills has over 2m sq ft of office space in the Square Mile under offer, surpassing the long-term mean by 21 per cent.
Julian Woolgar, Partner at Knight Frank said: “The workplace is now viewed as a strategic tool and hence companies are upgrading to better quality buildings in desirable locations that support talent enrichment.
The West End continues to see intensifying competition for the best quality office space, as niche financial firms jostle for the same specific locations with limited supply.”
