London's financial district has seen a surge in office space demand from niche financial firms since 2019, according to Knight Frank.
Despite economic challenges, hedge funds, private equity companies, and other investment firms have significantly expanded their London presence, accounting for 46% more office space leased in 2023 compared to 2019.
Asset and investment management, hedge funds, and private equity firms have been the primary drivers of this growth, collectively responsible for approximately 83% of office take-up over the past five years.
Several high-profile headquarters expansions and new entrants to the London market have fueled this demand, including Millennium Management, Citadel, Verition Advisors, Great Hill Partners, and One Rock Capital Partners.
With over 3 million square feet of leases set to expire or break before 2027, more than 60 large firms are evaluating their office needs. While some may renew or refurbish their current space, many are expected to relocate.
Niche financial firms are actively seeking over 92,903 m2 of new office space, with a substantial increase in deals for spaces between 929 m2 and 3,716 m2 since 2019.
The West End has been the epicenter of this office space boom, with around 70% of deals since 2019 concentrated in the area. Prime office vacancy rates in Mayfair and St James’s have reached record lows due to a combination of strong demand and limited new supply.
James Fairweather, partner at Knight Frank, said: ‘Despite speculation around a mass exodus of niche financial firms post-Brexit and with recent capital market challenges, London is clearly a critical growth hub for the sector. This is reflected in the number of new entrants, expansions and new headquarters being set up, with 2023 seeing the highest number of leasing deals since 2019.’
Julian Woolgar, partner at Knight Frank added: ‘The workplace is now viewed as a strategic tool and hence companies are upgrading to better quality buildings in desirable locations that support talent enrichment. The West End continues to see intensifying competition for the best quality office space, as niche financial firms jostle for the same specific locations with limited supply. As a result we’re advising clients to initiate searches far earlier than historically has been the case.’
London remains a global financial powerhouse, second only to New York for hedge funds and private equity firms. The city manages over $13.1 tn (€12.0 tn) in assets, including 46% of all assets managed by foreign investors, and is home to 20% of the world's top 50 private equity firms.
