Leasing across Central London was off to a subdued start with January take-up reaching just 246,407 sq ft across 42 transactions. This was down 48% on the same period in 2024, with much of the month’s activity consisting of smaller-sized transactions completing in the City Fringe.  Only one transaction over 15,000 sq ft completed during the month, with New Wave Capital having acquired the 6th and 7th floors (18,816 sq ft) at HYLO 103–105 Bunhill Row at £87.00 per sq ft.

Despite the limited level of transactional activity, overall underlying levels of demand provide encouraging signs for 2025 leasing activity. During the month space under offer increased by 30% to 3m sq ft and active Central London-wide demand remained broadly stable at 13.7m sq ft.

Whilst the vacancy rate remained at the same level, at 7.5%, we have continued to see the decline of tenant-controlled space across the market, with this further reducing by 2% in January. We are currently forecasting that the City vacancy rate will reach 6.8% by the end of 2025 but expect vacancy will remain broadly stable in the West End, with a record level of development completions expected this year.

City Highlights

West End Highlights

Market Focus

2025: Year of 'Grade A minus'?

Take-up in the years since the pandemic in Central London has largely been characterised by a focus on prime space in well-connected locations as companies sought to lure workers back to the office, and this largely remained true in 2024, with 8 of the 10 largest transactions having been pre-lets. With this intensified focus on prime, record rents have been achieved in the City and several West End submarkets, and average Prime rents in both markets have experienced double-digit growth just in the last two years.

This rental growth has also branched out away from the traditional core submarkets. In the West End, almost half of the £100+ per sq ft rents that were achieved in 2024 took place outside the markets of Mayfair and St James’s, compared to less than 5% in 2020. Similarly in the City, record rents were achieved across the five submarkets, and whilst most of the £100+ rents were concentrated in the towers, there were a number of examples of rents at non-tower space being achieved at levels either close to or even exceeding this level in the case of the JJ Mack Building, EC1.

Existing tight supply in the most desirable locations and a constrained pipeline will likely translate into further strong prime rental growth. Given the significant rise in overall rental costs that have also taken place over this period, in addition to other factors such as the rise in employer NICs and changing labour force dynamics, the priority for many will likely shift to value rather than necessarily seeking out the best of the best. However, a strong preference will still endure for buildings with excellent transport links, good end-of-trip facilities, and solid sustainability credentials.

We have already begun to see the impact of undersupply in prime locations has had on the demand for secondary space. For example, in Mayfair and St James’s, where vacancy rates are now below 4%, forcing occupiers reluctant to depart from this location to compromise on quality and consider good quality ‘Grade A minus’ space, particularly if they require larger floorplates or a self-contained building. In turn, this has led to an uptick in average Grade B rents in Mayfair/St James’s submarket area, following several years of either flat or negative growth.

Looking ahead, Savills latest rental forecasts are anticipating average prime rental growth of 4.0% over the next five years in both the City and West End. However, while the demand for prime will remain robust, the lack of availability of buildings of this quality will limit the number of such transactions. This should, in turn, also benefit rental growth of average Grade A space, for which we are currently forecasting average growth of 3.7% and 2.4% across the West End and City, respectively, over the same time period.

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Central London Office Market Watch – Q4 2024

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