Leasing across Central London was off to a subdued start, with take-up at the end of February reaching just 678,395 sq ft across 94 transactions. This was down 26% on the same period in 2024, with much of the month’s activity consisting of smaller-sized transactions, with 81% of transactions coming from the sub-10,000 category. So far this year we have seen a lack of larger-sized transactions – this month there were just two transactions over 25,000 sq ft. Beaumont Business Centres letting of New Bridge Street House, 30–34 New Bridge Street, EC4 (27,321 sq ft) and Unity Working’s letting of Ambika House, 9–12 Portland Place, W1 (25,224 sq ft). Take-up this year has continued to be driven by the Insurance & Finance Sector accounting for 24%, followed closely by the Tech & Media sector with a 22% share.

Despite the limited level of transactional activity, overall underlying levels of demand provide encouraging signs for leasing activity for the rest of the year. During the month space under offer increased by another 19% to 3.6m sq ft, and active Central London-wide demand remained stable at 13.7m sq ft.

The vacancy rate moved in by 10 bps in February and now sits at 7.4% – this is mainly down to the withdrawal of tenant-space; it fell by a further 9% in February, after a 2% fall in January. This is now the lowest vacancy rate in over four years, since December 2020.

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Market Focus

Changing Landscape of Active Demand

2025 has seen Active demand reach over 13.7m sq ft, 44% above the long-term average. Furthermore, we have continued to see more occupiers increasing their footprint (54%) than decreasing the amount of office space they intend to occupy in the future (16%), growth driven by natural company expansion and the return of employees to office spaces. We expect that take-up on the whole will be ahead of our longer-term projections, with minimal impact on the volume of space acquired as a result of hybrid working, and will only be 3% down on long-term average based on our projections.

However, best-in-class supply shortages and higher rental growth will play a significant role in shaping the landscape, with occupiers increasingly considering lease renewal feasibility, particularly short-term renewals whilst waiting for more of the best-in-class supply to become available.

Central London vacancy has fallen 100 basis points since last February and is expected to fall further during 2025, leading to fewer options for occupiers looking for new space – this can be evidenced when looking at prime tower vacancy, which is now at just 2.1%. This limited availability, combined with high upfront capital costs for relocating, may act as a break on annual take-up. As a result, 2025 may see an increased number of occupiers choosing to renew their existing leases instead of moving to new offices. The stay-put consideration has always been part of an occupier’s strategy but is becoming more prevalent, albeit the business disruption of refurbishing their existing whilst in occupation may ultimately rule this out for many. Currently around 45% of the 9.1m sq ft of requirements (50,000 sq ft + requirements) in Central London are considering stay vs go options.

Whilst we expect to see a growth to lease renewals this year, 42% of the overall quantum (by sq ft) of active demand consist of occupiers who have been at their existing premises for 15 or more years, and a further 23% for 10–15 years, increasing the likelihood of these occupiers choosing to relocate thereby reinforcing the positive outlook for leasing.

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Central London Office Market Watch – Q4 2024

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