London Commercial Property Market

London Office Market Report 2024

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A daytime view of the top half of Big Ben clock tower in London framed by a brilliant blue and white cloud-strewn sky. Image at LondonOfficeSpace.com.

The London Office Market in 2024 – At a Glance

The central London office market continues to shift in line with previous years’ trends, such as generalised downsizing due to hybrid work arrangements, a flight to quality, and a limited development pipeline. Although the first quarter of 2024 showed evidence of a slowdown in activity, this slow start of the year isn’t concerning considering that the market ended 2023 on a five-year high.

Here are some key indicators that summarise the status of the London office market in 2024:

– Total take-up levels were 2.47 million square feet in Q1, vs. 2.1 million square feet during the same period in 2023.

– Vacancy rates city-wide have increased to 9.5% in Q1 2024, vs. 8.9% in 2023.

– Lastly, the amount of office space under construction also remains stable, with 15.86 million square feet in 2024 vs. 16.75 million in 2023.

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Navigating Central London Office Market Trends

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A daytime view along London’s Millennium Bridge towards St Paul’s Cathedral. People are walking on the bridge wearing dark winter clothes, and the cathedral’s dome rises in the distance above buildings on either side. Image at LondonOfficeSpace.com.

Being one of the world’s top business hubs, Central London offers a diverse array of office spaces tailored to the needs of modern businesses. Having said that, the city’s office market is constantly being shaped by various economic and demographic trends. In this article, we explore the current trends and factors shaping the office space market in Central London.

Demand for Office Space

Demand levels in the Central London office market have exceeded forecasts, reaching new record highs in early 2024 relative to the past 10 years. Data from early 2024 shows appetite for Grade A offices accounting for 70% of total transaction volume in Central London.

Occupier demand for quality space is evident in the disparity between vacancy rates for different office asset classes. For example, while in the City vacancy rates average 9.5% for all classes, new build vacancies are significantly lower at just 1.4%. Moreover and further confirming the strong demand for new offices, pre-let rates are high for new Class A office buildings, especially among financial services occupiers, as many developments are fully let by the time they’re released into the market.

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The Best Postcodes in Central London for Your Office

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Dusk view down the River Thames of the illuminated Tower Bridge spanning the river with a purple and blue cloud-strewn sky in the background and riverbanks lined with buildings with postcodes in Central London.

Following the widespread adoption of remote work during 2020 and 2021, the majority of industry sectors are returning or have already returned to the office.

During this period, employee expectations regarding the office environment have changed. For example, many companies now report that staff increasingly demand shorter commutes, dedicated collaboration and relaxation space within the office, and upgraded amenities.

As a result, many business owners are considering downsizing and/or relocating their offices so the new location meets the needs of existing staff and future hires.

Since location is a key consideration, let’s look at what the most desirable central London postcodes are for your office in 2023 and beyond.

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Overview of The London Commercial Property Market Q2 2021

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2021 started at a sluggish pace for the London commercial property market. During the second quarter of the year, the market evidenced signs of recovery. Office, retail, and industrial markets registered an uptick in activity starting in April.

The main themes observed this quarter were:

  • A strong appetite for high-quality office and industrial space.
  • Growing investment volumes.
  • Vacancy rates kept increasing, but they’re still lower than expected.

Office Market

The London office market started to show signs of recovery during the second quarter of the year. Investment volume totalled more than £2.5bn, confirming the renewed confidence of investors in the future performance of the city’s office market.

Transaction levels were up, with most transactions involving Grade A space, sub-lets and dominated by the creative, technology sectors, non-profit and public sectors. Large transactions centred around the EC2 and SE1 postcodes.

Continue reading “Overview of The London Commercial Property Market Q2 2021” →

Overview of The London Commercial Property Market Q1 2021

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The London commercial property market entered 2021 surrounded by uncertainty. Weak economic fundamentals and pandemic-related disruption affected every sub-sector, although in different ways. During the first three months of the year, the following themes emerged:

  • Weak demand for office space with take-up rates below the 10-year average, which were balanced by exceptional demand for large industrial properties.
  • Excess retail space continued pouring into the market, with the exception of retail businesses deemed essential (i.e., homewares, grocery, and discount shops).
  • A sustained flight-to-quality, which was more evident in the office sub-market but also present in industrial properties.

Overall, the market was stable and showed greater resilience than expected. The quarter ended on a strong note and displaying moderate signs of improvement. Continue reading “Overview of The London Commercial Property Market Q1 2021” →

Overview of The London Commercial Property Market 2nd Quarter 2020

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Following the slowdown of the London’s commercial real estate market due to onset of the Covid-19 pandemic, activity levels have resumed during Q2, although cautiously. Transactions proceeded very slowly over the past three months, since fewer lenders are active and most tenants are on a wait-and-see mode. As a result, only a handful of transactions took place between April and June.

According to market analysts, it is still too early to quantify the true impact of the pandemic on commercial real estate, but the following observations ring true for the city: Continue reading “Overview of The London Commercial Property Market 2nd Quarter 2020” →

The London Commercial Property Market: An Overview of 2015

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4th Quarter – Commercial Property Market in London

As 2015 comes to an end, it’s time to sum up the key trends that have characterised the commercial property market in London over the past 12 months. The latest RICS UK Commercial Market Survey highlighted the growing demand experienced across all commercial property sectors, and in particular with regards to office and industrial properties. As expected, increased demand has resulted in higher prime rental values across all sectors. These averaged a 9.4 per cent increase in office rental prices, 7 per cent for retail stock, and just below 4 per cent for industrial properties (1).

The retail market benefited from exceptional levels of consumer confidence, which are at their highest since the late 90s. Annual change rates for retail rents in the West End averaged 14 per cent, whereas in the City they stayed at 4 per cent (2). Citywide, rental growth averaged 13.2 per cent. Vacancy rates dropped to 3 per cent, a figure that stands in stark contrast with this year’s national average at 14 per cent. Another key trend this year had to do with the performance of the industrial market, which experienced a boost as the e-commerce sector solidified its presence (3).

Office Market – Q4 2015

During the last quarter of 2015, the London office market has continued to display robust activity levels. At the beginning of Q4, year-to-date take up levels amounted to 9.7 million square feet, a figure that represents a 3 per cent increase over last year’s values. Most transactions involved firms involved in sectors like professional services, media and technology, and banking.

According to research data published by BNP Paribas, during November and December the main trends affecting the London office market were above-average leasing activity and a surge in investment levels. Vacancy rates dropped to 4.28 per cent in November, although this figure is likely to increase with the delivery of more than 7 million square feet of Grade A space over the course of 2016. Year-to-date take up rates reached 12.40 million square feet in early December (4). Continue reading “The London Commercial Property Market: An Overview of 2015” →

Overview of London’s Commercial Property Market – 3rd Quarter 2015

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Across the United Kingdom, the third quarter of 2015 has been marked by acceleration in GDP growth rates and by the strong performance of the service sector. These factors have had a positive effect on the country’s commercial real estate market, which has experienced increased stability and growing demand over the past three months. This trend has been particularly evident in the British capital, as summarised in the report below.

London Office Market: Trends and Highlights

In line with previous trends earlier this year, the office market in central London has continued to be driven by increased demand and record rental values have been the predominant theme in the West End and core city office locations. A Cushman & Wakefield market report revealed that in August 2015, availability for all office space types in Central London dropped to 9.7 million square feet, a figure that represents a 3.7 per cent decrease over the previous quarter. This record-breaking figure is also below the decade’s average, which stands at 15 million square feet. According to the report, the amount of office space under offer in central London has also increased substantially during this past quarter, growing by more than 4 per cent, or 60 per cent higher than the past 10-year average. It is estimated that there are currently 4.4 million square feet of office space under offer in central London.

Another key trend that has emerged over the past quarter is related to the large number of FinTech start-ups that have been launched across London. CBRE market analysts have reported that FinTech clusters are now well defined in areas like Canary Wharf, which is home to nearly 10 per cent of all recent start-ups in this industry sector. Office space in the South Bank is also highly sought after by FinTech start-ups, with postcodes like EC2A and EC1V following suit, and with another FinTech cluster evolving in and around Tech City, also in East London. If current market trends are anything to go by, in the near future we can expect to see a surge in demand for incubator space coming mainly from FinTech firms, as well as larger floorplate requirements, given that many of these companies are ready for expansion. Continue reading “Overview of London’s Commercial Property Market – 3rd Quarter 2015” →