A recent report highlights that the demand for office space in central London is holding steady at record-high levels. Between April and June, companies were in the market for approximately 13 million square feet of office space, consistent with the strong demand observed over the last two quarters, according to Cushman & Wakefield’s latest Central London Marketbeat Report.
The desire for top-quality, grade A office spaces is particularly strong, making up 77% of all leasing activity—a record high—continuing the trend of businesses seeking the best possible office environments. The highest demand has been for properties that meet the highest environmental standards, driven by upcoming changes to energy efficiency regulations that will render many London offices non-compliant with leasing standards within the next four years.
Leasing activity across Central London rose to 2.13 million square feet in the second quarter, a 29% increase from the previous quarter. Although overall leasing volumes in the first half of 2024 were 21% below the ten-year average, grade A office leases slightly exceeded this benchmark. The City of London remains ahead of the West End in activity, with nearly 70% more transactions taking place.
The availability of office space in Central London decreased to 27.3 million square feet this quarter, still 61% higher than the ten-year average of 16.92 million square feet. Consequently, the overall vacancy rate dipped by 18 basis points to 9.4% in Q2, with grade A office vacancies at 5.4%.
Andy Tyler, who leads London office leasing at Cushman & Wakefield, noted, “Although vacancy rates remain historically high, we’ve seen a stabilization in supply levels over the past five quarters. With the majority of demand centered on Grade A spaces, there’s increasing recognition that the availability of prime office space is becoming more limited.”
Looking ahead, the limited pipeline of new office developments suggests a slowdown in the introduction of new spaces to the market. This is expected to reduce both overall and grade A vacancy rates over the next year, likely leading to higher rents, especially for top-tier properties.
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