Central London MarketBeat Quarterly Report

The Central London occupational market has remained resilient over the last 18-months, with the very best schemes across the market continuing to lease well. Leasing activity was better than expected in 2023, with over 9.62 million sq ft of takeup recorded. Whilst this was down by 7% against the ten-year annual average, grade A leasing volumes of 6.75 million sq ft was up by 10% against the same metric – reinforcing the attractiveness of grade A office space for occupiers.

With the flight to quality now at full speed, this is likely to put pressure on both existing and future grade A supply, the latter of which remains constrained, with no new developments speculatively under construction beyond 2025. There remains uncertainty around some developments where construction has not yet commenced, with the viability of schemes due to rising debt and construction costs being questioned.

In the investment market, annual volumes for Central London offices were running at £7.3 billion at the end of 2023, the smallest investment market on record. However, activity did pick up marginally in Q4 providing some positive sentiment to take into the start of 2024.

Change of use is a big theme for the market, one that is likely to continue into 2024, with numerous examples of office acquisitions for hotel conversions in 2023, which will help to unlock investment opportunities. The strong fundamentals of the occupational market is also a strong draw for investors looking for income-generating assets.