Contents

• Across the City market

• Across the West End market

Across the City market

In Q1, the City saw an average quarter for leasing, with take-up reaching 1.2m sq ft across 101 transactions, which is down 13% on the ten-year long-term average and in line with the five-year average. Despite this, the leasing outlook for the City continues to remain positive, with space leased since the end of the quarter already reaching above Q1 leasing volumes.

Q1 take-up was driven by the Tech & Media sector, which outperformed the Insurance & Financial Services sector to become the lead driver of take-up in the city for the first quarter of the year, accounting for 23% of take-up. This has been buoyed by transactions from firms such as Trainline, PayPal and SS&C Technologies. This can be attributed to both a return to the office and a pick-up in growth in this sector.

At the end of the first quarter, City supply stood at 10.1m sq ft, which equates to a vacancy rate of 7.2%. This is 180 basis points down from the end of the first quarter of 2024, due to a smaller amount of developments being added to supply compared to space being taken up.

The current supply-demand balance dipped below 24 months for the first time since Q3 2020 in Q2 2024 and has continued to fall this year, reaching just 19 months at the end of March (we class anything below 24 months as an indication of a market that is biased in favour of landlords). However, there continues to be strong occupier demand for prime office buildings across the City, so despite this, there continues to be downward pressure on rents for lower quality office space, with average Grade B rents at the end of Q1 standing at £41.65 per sq ft.

The average City prime rent stood at £94.25 per sq ft. This was up only 1% on Q1 2024, due to a limited volume of prime tower transactions completing. The highest rent achieved so far in the City and a new record rent for SE1 was Allfunds Group's acquisition of the sixth and seventh floors at TBC.London, Tower Bridge Road at a blended rent of £98.75 per sq ft. We are currently forecasting prime rental growth of 4.5% for this year.

In the first quarter of 2025, there was 1.17m sq ft worth of completions, and we are expecting a further 3.84m to complete this year, giving a total of 5.01m, exceeding last year’s completions by 1m sq ft. Looking ahead, we expect 3.33m sq ft to complete in 2026, 2.39m in 2027, and 3.81m in 2028. However, due to the cost of finance and construction being above historical levels along with the current struggles within the construction industry with regards to labour, there is potential that the schemes in 2027 and 2028 that have not yet been funded will be pushed back. This is likely to leave us with a development shortage in 2027 and 2028, with only 3.6m currently under construction across the two years. This is adding pressure for firms to do short-term renewals in their current offices, with limited new stock coming to market.

City Highlights

Across the West End market

Despite the slow start to the first two months of the year, in addition to the continued economic uncertainty, take-up in Q1 proved to be relatively resilient. 474,638 sq ft transacted in March, bringing the total for the quarter to 755,551 sq ft across 86 transactions, up 20% on Q1 2024 and 11% on the five-year average.

Two of the three largest transactions this quarter were in Victoria, and both involved tenants expanding within their existing building. The larger of the two was Cleveland Clinic’s pre-let of c.85,000 sq ft at 40 Grosvenor Place, SW1. The US medical centre regeared on 25,000 sq ft of space, bringing its total footprint to just under 110,000 sq ft. Another transaction of note was the pre-let of the remaining top three floors (58,941 sq ft) of The M Building, 334 Oxford Street, W1 – this is roughly nine months prior to the scheme’s anticipated practical completion. The letting highlights the continued strong ‘lettability’ prospects of a new build development in a centrally located West End location, despite take-up overall continuing to lag the ten-year average by 14%.

Financial Services continues to be the primary driver of leasing activity, accounting for 31% in Q1, and space acquired from this sector is up 24% on the ten-year average and, when combined with Banking, was the second highest level we have recorded in the last 15 years. The Tech & Media sector followed on 19%, and whilst the levels of take-up are still some way below the levels witnessed in the years prior to 2022, there are some areas of positivity. For example, the number of transactions is above the five-year average, with the number of sub-10,000 sq ft size at the highest since Q1 2020.

The levels of under offers rose this quarter to 977,281 sq ft, returning to levels last seen at the end of Q3 2024. Notably, several of the larger under offers are in the core, which, similar to last year, has continued to see subdued levels of take-up owing largely to a lack of supply. Some of the larger under offers include McDermott Will & Emery on the entirety of the former Fenwicks store at 7 Brook Street, W1 (106,000 sq ft), and multiple parties at 33 Jermyn Street, SW1 (65,000 sq ft). Should these deals complete, they will likely provide a useful barometer for the average prime West End rent, which is heavily linked to transactional evidence in the Mayfair and St James’s markets.

Whilst the vacancy rate has remained unchanged quarter-on-quarter at 7.0%, there are several large schemes due to complete this year, including Olympia, W12 (490,000 sq ft), and 1 Triton Square, NW1 (180,000 sq ft), which could put upwards pressure on availability in the short term. Overall, we are currently anticipating 10.4m sq ft to be delivered between the remainder of 2025 and 2028, of which 19% has been pre-let. However, when focussing in on the space that is due to complete between now and the end of 2026, the pipeline is much tighter with 35% either being pre-let or under offer.

West End Highlights

EXPLORE MORE INSIGHT >

If you have any questions, please do not hesitate to get in touch via the Authors panel

_{Back to top of page}