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Funds hedge their bets on London

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London and more specifically the Core West End, still ranks as the number one destination for hedge funds in Europe according to “Hedging the Risk”, a new research report from Jones Lang LaSalle.

Andrew Barnes, director in Jones Lang LaSalle’s West End Agency team, says: “Hedge funds experienced a challenging 2011 and activity was muted however they still paid some of the highest rents in London.

“There has also been a definite change in where Hedge fund managers will consider looking with some now prepared to consider alternative locations to keep occupational costs in check, particularly if the building has a high profile. However, for some, Mayfair will always remain the premier choice despite costs.”

According to the report, Eurozone regulatory changes could aid London’s position as the European financial capital, counterbalancing UK domestic legislation, with demand expected from relocations driven by increasing taxation in the Eurozone.

Hedge funds are more foot loose than before and this coupled with a limited development pipeline in the Core West End and for some a focus on cost, location preferences have expanded.

While there has not been an exodus to Switzerland which was anticipated by some in 2010, hedge fund leasing activity was muted in 2011 but they still paid some of the highest rents in London. Hedge funds are also expected to return to the forefront of high rent deals in Core locations but some may be tempted by iconic buildings offering lower total occupational costs.
Barnes says: “The Hedge fund sector has matured, and there is a growing trend towards conservatism in their real estate requirements. Over the next three years we expect to see Hedge funds returning to growth and expansion and this, coupled with limited supply in Core locations, will see the return of very high rents for the best space, with similar headlines to those achieved in 2007.”

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