Central London has ‘record high’ active demand for office space

Many occupiers have commenced searches earlier than they previously would have – particularly in light of a constrained development pipeline beyond 2025.

Occupiers are seeking prime Grade A office space, with 77% of leasing activity in Q2 being for such high-quality space.

Most of the lettings in Q2 were within the City as opposed to the West End.

The report states that the City market remained the most active during the quarter, with 1.53 mln ft2 trading (74% of which was grade A), while the West End’s 485,000 ft2 accounted for 23% of take-up (82% grade A).

The figures for prime office take up are at record levels, said Cushman & Wakefield, showing a ‘flight to quality’ among occupiers.

In particular, demand for buildings with strong environmental credentials is growing rapidly, as changes to energy efficiency requirements mean that most offices in London will not meet the minimum standard for leasing within the next four years. The UK Government currently requires rented commercial properties in England and Wales to have a minimum EPC rating of E, this is anticipated to increase to a minimum rating of C in 2027 and B in 2030.

London still has weaker leasing activity compared with the 10-year average. Overall leasing volumes were down 21% on the 10-year average in the first half of 2024, though grade A leasing volumes increased by a percentage point during the same period.

Demand for space is high at a time when supply across central London is 61% above the 10-year average. At the same time, during the quarter supply reduced a little to 27.3 mln ft2. As a result, vacancy levels fell slightly to 9.41 % in Q2. Vacancy rates for grade A offices stand at 5.35%.

Andy Tyler, head of London office leasing at Cushman & Wakefield, said: ‘While historically high vacancy rates underscores ongoing challenges in the market, we've further observed a stabilisation in supply levels over the past five quarters. With the majority of occupiers focussed on Grade A space there is an increasing awareness that the availability of the best-in-class space is under increasing pressure.’