- Grade A office demand drives record rent growth in prime locations
- Investor sentiment remains cautious despite positive leasing trends
The Central London office leasing market demonstrated remarkable resilience in 2024, achieving an overall take-up of 9.68 million sq ft, a 1% increase on 2023 and the second highest volume in the past five years, according to Cushman & Wakefield's latest ‘Central London Offices Marketbeat’ report.
Strong demand for quality characterised the year, with Grade A take-up volumes comprising 65% of total leasing activity, surpassing the 10-year average volume by 4%. This heightened demand, along with the high standards of new developments, has led to some of the strongest rental growth on record especially in prime locations within core submarkets, with rents rising by 7.8% in the year to Q4 2024 across Central London.
The City accounted for 65% of take-up volumes over 2024, which is the third highest share on record behind 2023 (70%) and 2009 (69%). The West End accounted for 34% while East London claimed 3%.
While 75,000+ sq ft transactions achieved their highest count since 2019 at 11, it was the sub-25,000 sq ft deals that drove the market, accounting for 87% of the total count.
Andy Tyler, Head of London Office Leasing at Cushman & Wakefield, said:
“Q4 witnessed significant leasing transactions with the likes of Moodys, Octopus and Creative Arts Agency. We expect the leasing market to maintain its momentum in 2025 and is already in evidence in viewing levels and negotiations in this first quarter. Despite elevated availability levels, active demand remains robust, with a notable increase in larger requirements of 250,000 sq ft and above. The return of these larger deals, of which there have been relatively few in recent years, will provide a significant boost to the London market.”
The positive performance of the occupational market was not matched by increased investor sentiment in 2024 when investment totalled £6.05 billion. This represented an 18% decline from 2023, reflected in the lowest average deal size on record at £30.7 million. Prime office yields remained stable in Q4, with the City at 5.75% and the West End at 4%.
The report also highlights several upside risks for 2025, including modestly positive economic indicators across the UK, such as headline inflation and GDP figures, which are supporting market expectations of further interest rate cuts.
Martin Lay, Head of London Office Investment at Cushman & Wakefield, said:
“The last quarter of 2024 saw a 45% increase in investment activity on Q3 and the highest quarterly total since Q1 2023. This momentum has continued into the first month of 2025, which has already seen a number of landmark transactions being concluded. This provides further evidence that global capital flows are once again starting to focus on opportunities in London, bringing improved liquidity to the market, which we expect to be supported by multiple UK interest rate cuts as the year progresses.”
