Searchlight Capital moved to its new office in Golden Square in Soho earlier this year.
With its trendy bars, restaurants and shopping streets, the new West End spot is a “much more vibrant location” than the private equity firm’s former office hub, near the famous tailors of Savile Row in Mayfair, said co-founder Oliver Haarmann.
“Our team enjoys the buzz of the area, which has definitely helped to get people back into the office post-Covid,” he told Financial News.
With its private members’ clubs, aristocratic residences and reputation for glamour, Mayfair has long been the neighbourhood of choice for London’s biggest private equity houses, venture capital firms and hedge funds. But finance tenants are increasingly tempted by opportunities outside the capital’s most exclusive postcode.
At least 14 lease deals closed last year in which firms left Mayfair for other London areas, according to Cushman & Wakefield transaction data of offices 5,000 square feet or over.
That compares to just seven such deals coming into Mayfair over that time frame.
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Searchlight Capital joins other recent corporate Mayfair émigrés, including Perella Weinberg and AllianceBernstein. Canadian investment giant CDPQ has also swapped St James’s for Soho, taking a new London HQ near Carnaby Street in May.
Smaller investment houses such as Nauta Capital, Butler Investment and Index Ventures have also agreed to move out of Mayfair in the past year.
Famously eye-watering rents in the London luxury heartland, combined with a shortage of new, high-quality office space coming onto the market, are partly to blame. So-called grade A office rents in Mayfair were about £122.50 per sq ft last quarter — far above Soho’s £92.50 per sq ft and the City’s £79 per sq ft, according to Statista.
Only about 314,000 sq ft of such grade A space was available as of June, Cushman & Wakefield said, compared to a whopping 3.1 million sq ft in the City. Even accounting for the relative size difference of the locations, the figures represent a “super-tight” market, said Cushman’s research director Heena Gadhavi.
The moves are emblematic of a broader trend among companies that are competing for fresh talent in finance. In a tight job market where banks and other firms are hiking junior pay into the six figures, companies are increasingly forced to sell themselves to prospective employees, rather than the other way around.
“The truth is Mayfair is not super-exciting,” said Cushman’s leasing director Angus Currie. “If you’re looking for tech-savvy, young and dynamic talent, you need to be in a market equivalent to that. Somewhere like Soho is much more appealing.”
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Shaun Dawson, head of insights at real estate consultancy DeVono, adds that while attracting talent through pay and benefits is important, “going that extra mile with the workplace helps with attraction and more importantly, retention”.
The lack of available space in Mayfair is a particular headache for firms looking to upsize their offices.
New York-founded Perella Weinberg is packing up its 20,000 sq ft Mayfair offices in Grafton Street, which have been its UK home-from-home since 2006.
The firm’s London bankers will move to a newly built office at 80 Charlotte Street in Fitzrovia in the coming months, after signing a 12-year lease for roughly 30,000 sq ft at the site.
“Because there isn’t enough space [in Mayfair] to accommodate everyone, some firms lose out and are forced to choose between looking further afield or compromising on space,” said Savills leasing director Freddie Corlett. “And in a post-Covid world, most will choose the latter because of the importance of the product.”
Not only is the new site — a brand new refurbishment developed by FTSE 250 property firm Derwent London — a “better building” with far better environmental credentials, more light and swanky new meeting rooms, it is also bigger.
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Perella’s old office was set over five floors, while its new space is across one. “That’s far more preferable for most tenants,” said Corlett.
Expensive rents are no big deal to the biggest players, but the prices of the best offices in Mayfair have reached a point where they are becoming “a challenge for a lot of people”, said Currie.
The asking price of £150 per sq ft that Warburg Pincus paid for its let earlier this year is becoming more common.
“It is not an average business that will take space at that kind of level,” Currie adds.
As a result, companies might feel they can get better offices for the same price. AllianceBernstein ventured as far as the City of London early last year, signing a lease at a new development on London Wall for just £79 per sq ft.
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Currie, who represented Bernstein on the deal, says the fact the City was “better value” was a big factor in the move — along with its new building’s large floor areas, terraces and sustainability credentials.
Savills’ Corlett adds: “When businesses come to realise they are not going to get what they want unless they are willing to pay an extortionate amount of money, it opens the floodgates to looking at other locations. And once businesses have led the way in this, others will follow.”
Despite all of this, Mayfair remains the district of choice for some of London’s biggest private equity firms. That is, “if you have got the money and if you can find the product,” said Corlett.
Earlier this year, alternative investments giant Blackstone signed for a new headquarters in Berkeley Square, following a post-pandemic recruitment drive. Blackstone’s headcount at its European headquarters has swelled to nearly 550 employees —up from 364 on 1 March 2020.
And Thoma Bravo recently chose St James’s Square as its London base, as the US private equity firm prepares to set up shop in the capital. It joins the likes of Cinven, Glendower, Astorg and PAI in the neighbourhood.
“For really big, established private equity firms, real estate is not your biggest cost. It is your staff and your people,” Corlett said. “And to attract the best people, you have got to get the best real estate.”
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To contact the authors of this story with feedback or news, email Alex Daniel and Sebastian McCarthy
