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Just 5.91 million sq ft under construction and available beyond 2025, equivalent to under a year’s supply of Grade A space
New quarterly London office data from Cushman & Wakefield highlights the constrained conditions faced by occupiers seeking Grade A space in London and points to further challenges to come, with just 5.91 million sq ft of total office space currently under construction and available beyond 2025.
Demand for London office space is in rude health with take up totalling 2.13 million sq ft over 125 deals* in Q1 2025, maintaining the upward trajectory seen in recent years. The City accounted for 62% of take up volumes in the quarter, meanwhile, the West End accounted for 34%. Robust demand for the best space continues, with Grade A leasing totalling 1.46 million sq ft in the last quarter, equating to 69% of the quarterly total, mirroring the trends highlighted in Cushman & Wakefield’s recent London Moves report.
However, transactional activity is being constrained by supply shortages in core markets, impacting the translation of demand into take-up. This is particularly acute at the larger end of the market, with just 11 buildings existing or under construction able to satisfy Grade A requirements above 250,000 sq ft - of which there are 13.
There is 15.93 million sq ft of office space currently under construction, of which 42% is already pre-let. Additionally, of the total under construction pipeline, 54% is due to complete in 2025 of which 61% is pre-let. This leaves just 5.91 million sq ft under construction and available completing beyond 2025, equivalent to under one year’s supply of Grade A space – suggesting an impending squeeze on new space and further rental growth.
Andy Tyler, Head of London Office Leasing at Cushman & Wakefield, said:
“Occupiers seeking high-quality, well-located space in London face an ever-diminishing pool of options. We are seeing the combined consequences of higher interest rates and yields, high construction costs and continued investor uncertainty versus the wants and needs of today’s occupiers for more and better space. While the pipeline of best-in-class office stock continues to be eroded, we can expect further upwards pressure on rents.”
Prime headline rents in the West End increased to £160.00 per sq ft in Q1 2025, a rise of 7% versus Q4 2024 and up by 14% over the last year. Prime headline rents in the City Core increased to £87.50 per sq ft in Q1 2025, up 1.2% on the previous quarter and 9.4% over the last year.
“A lack of supply and rising costs are causing occupiers to think more creatively. For some, taking up regears on their existing lease in order to delay decision making is practical but relies upon the space being of sufficient quality. For others, deeper discussions around migrations to new locations or even taking space over and above that required to secure a building that otherwise matches their requirements offer viable alternatives, Similarly, investors are thinking more creatively acknowledging the capex required by occupiers in moving. This includes turnkey proposals plus differing structures around rent frees and capital contributions,” said Tyler.
A Spring Thawing in Capital Markets
The first quarter of 2025 saw £2.56 billion of office investment transactions across 40 deals, up 33% on the previous quarter and the highest quarterly volume since Q3 2022. These figures were flattered by three significant deals, two by Norges and one by Modon, which accounted for more than 40% of the quarterly activity. Even despite these transactions, the figure remained 24% down against the 10-year long-term average.
The West End claimed the majority of transactions, as the smaller lot sizes and broader investor base found in this market continue to be favoured by investors, accounting for 67% of all activity. However, Q1 2025 also reported the first transaction over £500 million since Q3 2022, with Norges Bank Investment Management purchasing a 25% stake in the Covent Garden Estate for £570 million. This helped push the average lot size up to £64.07 million – double that of the previous quarter.
At the close of Q1 2025, there was £3.88 billion worth of assets available or at the bids stage, which is up on the £3.15 billion at the end of 2024. A further £1.49 billion was under offer at the end of the first quarter.
Martin Lay, Head of London Office Investment at Cushman & Wakefield, said:
“Whilst we have started to witness increased volatility in the market since the end of the quarter given the wider global environment, expectations of multiple rate cuts in 2025 and the recent material lowering of swap rates, provide reasons for optimism for both market pricing and levels of market activity as the year progresses.”
*125 deals above 5,000 sq ft.
