The Cost of Office Space in London 2024

Share

min read

Patrick Isitt
Content Manager
Content specialist in office design and build.

London Office Market Overview

The first half of 2024 saw improved levels of take-up in the London office market, with over 2.2 million sq ft signed in Q2. This represents a 5% increase from Q1 and is on par with Q2 2023, bringing the H1 total to 4.3 million sq ft. However, this total is still 14% below the 10-year quarterly average.

A strong preference for high-quality, best-in-class spaces is a continuing trend, evidenced by a rise in retrofitting projects and development schemes under offer. While the supply of new build space reached a low, overall availability decreased, and vacancy rates in the City fell for the third consecutive quarter, suggesting a tightening market. These trends indicate a cautiously optimistic outlook for the remainder of 2024, with steady demand and rental growth expected to persist.

Prime rent in London

A limited supply of best-in-class spaces has led to further growth in London’s prime rent, with the West End core increasing to £150 per sq ft. Elsewhere in the Capital, the City sits at £85 per sq ft, while the Shoreditch and Victoria submarkets also saw an increase.

Vertical market activity

The finance sector dominated take-up in the most recent quarter, accounting for 27% of the activity. This was largely due to Citadel’s pre-leasing of 250,000 sq ft at 2 Finsbury Avenue, marking the largest deal of the year.

The TMT (Technology, Media, and Telecommunications) sector also showed strong performance, contributing 21% to the overall demand and transaction volumes. Alongside these sectors, the Government sector accounted for 8% of the take-up. A notable transaction in this category was the University of Sunderland’s deal for 95,000 sq ft at HX5 Harbour Exchange, reflecting a growing trend of non-London universities seeking space in the capital.

The cost of office space in London in 2024

Borough	Grade A Rent (per sq ft)	Grade B Rent (per sq ft)
Knightsbridge	£82.50 - £92.50	£60 - £80
Hammersmith & White City	£50 - £60	£37.50 - £50
Victoria	£80 - £90	£62.50 - £72.50
Paddington	£75 - £87.50	£60 - £70
Chiswick	£45 - £55	£35 - £45
St. James’s & Mayfair	£115 - £150	£70 - £102.50
Covent Garden	£80 - £95	£57.50 - £75
Soho	£90 - £105	£65 - £82.50
North Oxford Street (East & West)	£80 - £92.50	£62.50 - £75
Midtown	£70 - £77.50	£50 - £67.50
Holborn & Bloomsbury	£72.50 - £85	£65 - £72.50
London Bridge & Southbank	£65 - £77.50	£55 - £60
City	£75 - £85	£67.50 - £75
King’s Cross & Euston	£77.50 - £90	£55 - £70
Clerkenwell & Farringdon	£80 - £92.50	£62.50 - £77.50
Shoreditch & Old Street	£70 - £77.50	£55 - £70
Whitechapel & Aldgate	£50 - £60	£35 - £45
Hackney & London Fields	£35 - £42.50	£25 - £32.50
Stratford	£45 - £55	£30 - £35
Canary Wharf	£50 - £55	£35 - £40
Battersea & Nine Elms	£35 - £57.50	£20 - £30
Camden & Kentish Town	£45 - £60	£40 - £50

These costs are a guide provided by local commercial property experts and rent reports. Costs are updated each quarter, and are subject to change.

Contact us for more information about office rental costs in London.

GET IN TOUCH

Demand for quality office space

There is an increasing demand for large corporations to achieve their ESG goals and embrace more sustainable practices within their business operations. This means that properties with high energy-efficiency ratings and sustainability accreditations are leading the way for tenant demands. This also includes properties with access to wellbeing facilities and other perks to help attract staff back into the office.

To help improve the quality of space, tenants and landlords will invest in technology and sustainability to retain and attract tenants. On top of prioritising sustainable building credentials, all new buildings in London need to be net zero by 2030. The Net Zero Carbon Buildings Declaration extends to all existing buildings also being brought up to standard by 2050. This will shape investment activity with asset managers wanting to secure properties with the correct credentials which will subsequently reduce the appeal of the properties which need to be upgraded to hit certain goals.

Development activity

The development pipeline in London has seen some shifts in H1 2024. The volume of new starts has fallen steadily from an all-time high at the end of 2023, however, it sits well above the ten-year average at 4.2m sq ft.

This sustained activity is largely driven by the requirement to adhere to the EPC rating regulations that came into effect in 2023. All buildings must reach a standard of E if they are to be traded or leased and these minimum standard ratings will rise to C in 2027 and B by 2030. At the moment, it is estimated that 80% of London’s office buildings will need to be upgraded to meet the new requirements.

In terms of submarket activity, the West End is ahead of the City as the most active area for new construction, thanks to three large new starts. This indicates a vibrant development landscape, driven by both the need for modern, energy-efficient office spaces and the ongoing demand for high-quality environments.

Leasing activity

Tenants are being more selective of their properties as they seek out best-in-class space but there is still a strong level of commitment in the Central London market. Larger transactions have driven improved leasing volumes across the city; take up improved over the course of H1, with the most recent quarterly figures reporting it at 2.2m sq ft, which is up 5% quarter on quarter.

The two-tier market is well and truly established as the gap between Grade A and Grade B space continues to widen. Occupiers are persistent in their desire for modern, well-situated offices, with 68% of current space under offer being for pre-let, newly built, or refurbished.

The major trend shaping leasing activity is the lack of good quality stock in the market which is helping support rental growth. Top rent in the West End has now moved up to as high as £150 per sq ft with other key submarkets like Soho and Farringdon pushing £97.50 and £105 per sq ft, respectively due to increased demand.

The outlook for London office space

As we move through 2024, the London office market continues to adapt to the evolving work environment. Hybrid working remains a predominant choice for many companies, influencing decisions around office space. Economic considerations and the ongoing impact of hybrid working patterns play a significant role in shaping these decisions.

The trend of redesigning and restacking office space persists, especially among occupiers in Grade A spaces. The flight to quality continues to be a major driving force, with companies prioritising top-tier real estate that offers the best amenities and green credentials. This has led to a notable trend of businesses opting to reduce their real estate footprint while upgrading to higher-quality buildings. Flexibility in office offerings has become a non-negotiable aspect for most organisations, as the competitive market ensures that companies can find options that meet their needs.

Environmental concerns are increasingly influencing tenant decisions. The tightening of Minimum Energy Efficiency Standards (MEES) and the focus on carbon footprints are significant considerations. The April 2023 EPC regulations have posed challenges for landlords, particularly with the increased availability of Grade B space. Landlords face a critical decision: refurbish their assets to meet higher standards or wait for potential government intervention. Properties below the EPC E standard are not viable for letting, underscoring the urgency for upgrades.

Despite these challenges, the ongoing improvements by landlords show promise. Upgraded properties are attracting investment, and there is a steady pick-up in investment activity expected throughout 2024. The focus on sustainability, energy efficiency, and high-quality office environments is set to shape the future of the London office market, driving both tenant and investor interest as the year progresses.

The London Office Rent Report

Download our report on average office rent rates for Grade A and Grade B space in London to gain a market overview and analysis of prime rent rates across London submarkets.
Find Out More

For further advice on the London office market, our workplace experts can guide you through both tenant and landlord markets in greater detail.

Contact us below if you need any help or require more information on our workplace services.