London’s Alternative Investment Firms Lock in Longer Deals at Higher Costs Amid Rising Prime Office Rents, Says CBRE

New analysis from CBRE’s Tenant Advisory Group has benchmarked two of London’s most active alternative investment sectors within their peer group, which shows a series of differences between hedge funds and private equity firms office strategies across London, including rental cost in relation to the market, location, occupational density and lease length. 

 

 

According to the data, more than half of hedge funds and private equity firms (56% and 54% respectively) pay above prime rent, compared to 37% of the typical London occupier. Furthermore, private equity firms pay significantly higher premiums, at 24% above prime rents. This is compared to 20% for the typical London occupier, and just 9% for hedge funds.

 

 

CBRE also found that both sectors take more space per headcount when compared to the wider financial services sector. The typical financial services firm takes 120-200 sq ft per headcount, compared to a median of 218 sq ft for hedge funds, and 242 sq ft for private equity firms.

 

 

Disparities also exist for lease terms. The average lease term for private equity firms is 12 years, with hedge funds signing for 10 years. However, a growing number of 15-year deals have been signed in recent years, reflecting the desire to commit to best-in-class space for the long-term.