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  • The Cost of Office Space in London 2024

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min read

Patrick Isitt
Content Manager
Content specialist in office design and build.
  • London Office Market Overview

    The latest figures show demand for office space in the City of London continues to rise, with transactions in the last quarter totalling 2.7m sq ft — 9% above the 10-year quarterly average. The vacancy rate in Central London, which gradually rose in 2023, reportedly sits at 8%, however, this is expected to fall as we move into 2024 with development slowing over the next 12 months.

  • While there is still a desire to incentivise a return to the workplace, many businesses have found their ‘sweet spot’ when it comes to time in the office. This may reflect a reduction in time spent in the office, in line with the trends seen in previous years.

    The outlook for London investment shows that activity is moderate, with signs that sentiment is improving despite significant work to do to reach pre-pandemic levels.

    Investment transactions reached £1.29 billion in the Central London office market. This represents a 9.9% reduction in comparison with the previous quarter, while annual transactions are also significantly lower than the trend of £15bn, currently reported at £6.55bn.

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  • 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 increasing to £135 per sq ft. Elsewhere in the Capital, the City sits at £77.50 per sq ft, while the Shoreditch and Victoria submarkets also saw an increase.

    Vertical market activity

    TMT, Financial Services and Professional Services are all core active sectors that have driven both demand and transaction volumes in the most recent quarter, and this is a trend that we have seen over the last 12 months. At the end of 2023, the Service Industry accounted for 30% of the quarterly volumes, with John Lewis & Partners leasing 109,000 sq ft at 1 Drummond Gate contributing to that overall figure.

  • The cost of office space in London in 2024

    BoroughGrade A Rent (per sq ft) Grade B Rent (per sq ft)
    Knightsbridge£82.50 - £87.50£60 - £75
    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 - £140£70 - £92.50
    Covent Garden£80 - £87.50£57.50 - £75
    Soho£85 - £97.50£65 - £77.50
    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 - £82.50£67.50 - £75
    King’s Cross & Euston£77.50 - £85£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.

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  • 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.

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  • 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 ongoing demand for high-quality office space, coupled with the recovery of the construction industry from the pandemic, has led to an increase in the development pipeline in recent months. In the last quarter, the development pipeline in London increased to 16.4m sq ft, with 12.4m sq ft being built speculatively and just under a quarter being pre-let (24%).

    The most recent figures show that London is experiencing its highest volume of new developments on record, with over 5m sq ft due to be completed by early 2024 and just below 17 million sq ft of space by 2026.

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  • Of that pipeline, a large proportion can be attributed to the City, where future development completions are expected to deliver 11.0m sq ft by 2026. However, completion dates may be impacted by supply chain issues and other delays in the construction process

    One of the most important drivers for refurbishments and new developments currently is 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.

  • 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 2023, with the most recent quarterly figures reporting it at 2.7m sq ft, which are some of the strongest figures since 2019.

    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.

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  • 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 £140 per sq ft with other key submarkets like Soho and Farringdon pushing £97.50 and £92.50 per sq ft, respectively due to increased demand.

  • The outlook for London office space

    Most companies have settled on hybrid working, in some form, as their route forward and this choice remains one of the key decision factors when considering office space. There is an awareness of the current economic climate and how that may affect organisations’ plans to bring more people back to the office.

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  • Redesigning and restacking office space is still a popular solution, particularly for those occupiers who are already in Grade A space. The flight to quality and desire to occupy top-tier real estate is still a hugely influential factor in London, as well as across the UK. For companies looking to attain the best amenities and green credential properties, the option to shrink their real estate and upgrade to a higher-quality building is an appealing one. There is a reluctance to compromise as what one company may not be willing to offer, another will be. This means that flexibility has become somewhat of a non-negotiable for most organisations.

    With tenants being more aware of the carbon footprint, the EPC regulations of April 2023 pose a headache for landlords. As the increased availability of Grade B space eventually gets to a higher level, landlords will face the question of refurbishing their assets or holding out and waiting for the government to step in and help. Until those works are done, anything beneath the EPC E standard will not be viable to let. However, the upgrades that landlords are making to their properties do show promise and these improvements offer incentives for investment which is predicted to steadily pick up as we move through 2024.

  • 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
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  • 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.

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