Contents

• Across the City market

• Across the West End market

Across the City market

June saw the best month for take-up so far this year with 868,814 sq ft completing across 52 transactions, topping off a very strong first half for the city. This brought the total for the half to 2.91m sq ft, across 195 transactions. This is up 15% on H1 2023 and up 3% on the long-term average for this period. So far this year, the Insurance and Finance sector has been the main driver of take-up with a 32% share, boosted by transactions such as Citadel’s pre-let at 2 Finsbury Avenue, EC2, which is due to complete construction in early 2027. Notably, the Tech & Media sector has had a strong half with a 23% share of take-up – a positive sign after a fall in demand from this sector in 2023 saw them make up only 12% of take-up.

Furthermore, there has been a resurgence of activity from the Serviced Office sector, representing 7% (473,571 sq ft) of office space acquired last year and 10% (293,276 sq ft) in H1 2024. In fact, Q2 achieved the highest quarterly take-up this sector has seen since the pandemic marking a renewed demand for flexible office solutions.

At the end of H1, the average prime rent stood at £98.07 per sq ft, up 12% on the average prime rent achieved in H1 2023. The top rent achieved in H1 was £108.00 per sq ft, with international arbitration firm Three Crowns taking the 8th floor at Helical’s JJ Mack Building in March. This highlights the rental premium paid for best-in-class space with the best sustainability ratings.

Development completions hit 799,312 sq ft in Q2, bringing the H1 total to 1.63m sq ft, and with another 2.24m sq ft expected to complete this year we are set to see the highest level of completions since 2020, 22% above the average level of completions for the City. However, it is worth noting that at the end of 2023, we were expecting 4.8m sq ft of completions this year, around 1m sq ft more than we are currently expecting, with typical delays having seen more schemes moved further out into 2025 and beyond. When comparing the timing of schemes currently scheduled for completion between now and 2027, 37% have been delayed by at least two or more quarters when compared to their initial timing at this point in 2023. Furthermore, 28% of the 2024–2027 development pipeline is yet to start construction, which could further add to these delays.

On the other hand, we have seen strong pre-letting in the first half of the year; 14% of take-up has been in the form of pre-lets and, with 30% of the 2024-2027 pipeline already pre-let, it provides encouragement to developers that the best assets will be viable.

City Highlights

Across the West End market

June was the most active month of the quarter, with 247,287 sq ft completing across 33 transactions, bringing the total for Q2 to 609,923 sq ft, a similar level to Q1, and H1 to 1.23m sq ft, down 17% on last year, and down 35% on the 10-year average. The absence of larger deals so far this year has impacted the low levels of take-up in H1. Notably, this was the first H1 since 2009 not to record a 100,000 sq ft+ transaction. There has been greater resilience in the sub-10,000 sq ft size band, with the number of transactions in line with the five-year average.

The largest transaction to occur this month was Liberty Global’s lease of the 1st to 4th floors (35,901 sq ft) at 120 King’s Road, SW3, and was the most significant to take place in Chelsea since 2017. In fact, several of the more sizable leasing deals so far this year have been outside of the Core West End submarkets, with four of the top five taking place in fringe markets. The relative lack of activity in the core compared to last year has led to a fall in the average prime rent, which at £129.50 per sq ft is down 2.6% on H1 2023. However, H1 average Grade A rents have increased 3.5% year-on-year to £90.96 per sq ft.

The vacancy rate increased 60 bps quarter-on-quarter to 7.9%, the highest since Q4 2003, with much of the increase resulting from the 672,000 sq ft added from the development pipeline. Beyond the pipeline, the most notable addition to supply in recent months has been 1 Rathbone Square (240,000 sq ft), being vacated by Meta. However, it is worth noting that 80,000 sq ft of this has completed to Monday.com since the end of Q2.

The development pipeline is set to remain elevated over the coming years, with above-average levels of completions scheduled each year until at least 2027 with around 9.7m sq ft due for delivery during this period. 17% of this space has been pre-let, although with around a third of the 1.23m sq ft of space currently under offer being pipeline, there should be an uptick in this figure. Furthermore, delays to schemes will likely persist given development costs remain high, in addition to the fact that 38% of the space has yet to begin construction.

West End Highlights

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