Contents

• Across the City market

• Across the West End market

Across the City market

The City recorded a robust first half for leasing activity, with take-up reaching 3.1 million sq ft. This was up 5% year-on-year (YoY), 29% above the five-year average, and 12% above the ten-year average. This strong performance was underpinned by several large transactions in Q2, most notably Squarepoint’s pre-let of 400,000 sq ft at 65 Gresham Street, EC2 – a development which is yet to start construction but is currently anticipated to complete in 2028. Occupier demand continues to be driven by a preference for office space with strong sustainability credentials. In H1, 69% of lettings were in buildings rated BREEAM Excellent or Outstanding, up from 61% in H1 2024.

The City Core, particularly EC2, remained the most active submarket, accounting for 35% of total take-up. However, this represents a decline from 48% in H1 2024, largely due to limited availability in prime tower stock, prompting occupiers to explore alternative locations. For instance, SE1 experienced a 99% increase in take-up compared to H1 2024, driven by demand for high-quality riverside buildings. A key example is LEGO’s acquisition of 191,894 sq ft across multiple floors at 76 Southbank, SE1.

At the end of H1, City supply stood at 10.4 million sq ft, which equates to a vacancy rate of 7.5%. This is 150 basis points (bps) down from the end of Q2 2024, but up 30 bps from the end of the first quarter of this year due to additions from pipeline including Angel Square, EC1 (188,000), Finsbury Dials, EC2 (142,000), and The Print and The Ink Building, 25 Lavington Street, SE1 (Total of 365,000). The current supply-demand balance dipped below 24 months for the first time since Q3 2020 in Q2 2024 and has continued to fall this year, reaching just 19 months at the end of June, reflecting the strong occupier demand in the City market.

Prime rents are up 1.5% on H1 2024, sitting at £98.73 per sq ft, a figure we expect will rise over the second half of the year, particularly with space under offer on the top floors at 8 Bishopsgate, EC2. Grade A average rents reached £71.26 over the first half of the year, up 2.5% on the same period last year. Based on the assumption of continued polarised occupier demand, we are forecasting average prime rental growth of 5.5% for the City and 3.5% for Grade A rents in 2025. By contrast, we are currently forecasting -2.2% rental growth for Grade B rents as occupier demand continues to wane.

In the first half of 2025, there were 2.24 million sq ft worth of completions, and we are expecting a further 3.84 million sq ft to complete this year, giving a total of 4.97 million sq ft, exceeding last year’s completions by 1 million sq ft. At almost 5 million sq ft, development completions for this year are set to hit their highest level on record since 2014, 49% above the long-term average completions. However, it is worth noting that a large proportion of the space has been pre-let, and 45% of the H2 2025 pipeline has already been let. Overall, 23% of developments scheduled for completion in H2 2025–2028 have been let prior to completion.

Looking ahead, 3.50 million sq ft is forecast to complete in 2026, followed by 2.47 million sq ft in 2027, and 3.61 million sq ft in 2028. However, with financing and construction costs still elevated relative to historical norms – and the construction sector facing ongoing pressures – there is a risk that some unfunded schemes scheduled for 2027 and 2028 may be delayed or deferred.

City Highlights

Across the West End market

A further 825,835 sq ft transacted in Q2, a level very similar to what was recorded in Q1, bringing the total for H1 2025 to 1.66 million sq ft across 165 transactions, up 32% on H1 2024 and 14% on the five-year average. Leasing activity continues to be supported by an uptick in the number of larger deals, with the number of 50,000 sq ft+ deals in the first half of the year standing at eight, compared to just two in H1 2024. This is the highest number that we have recorded in an H1 period since 2019, and the second highest in the past 20 years. Conversely, the quantity of deals in the mid-size 15,000–25,000 sq ft and 25,000–50,0000 sq ft brackets is both lower YoY, falling back to levels last recorded in H1 2020.

In the largest transaction of the year so far, McDermott Will & Emery pre-let 106,000 sq ft at Lazari’s 7 Brook Street, W1 scheme. The deal will see the law firm relocate from its existing premises at 22 Bishopsgate, EC2, to the former Fenwick department store and double its current footprint in the process. This was the largest acquisition of space by a law firm that we have ever recorded in the West End. The Financial Services and Banking sectors, however, continue to be the primary driver of leasing activity, accounting for 37% of acquired space, with over two-thirds of the latter derived from the Asset & Investment Management and Private Equity sub-sectors, including the likes of CD&R and LCM Partners.

Several transactions at buildings currently under construction in the core or that have recently completed, in addition to a handful of top-floor deals in the surrounding markets, saw the West End average prime rent increase to a new high of £171.22 per sq ft, up 10.3% YoY. An analysis of current under offers suggests that this high number of top rents achieved likely won’t be sustained in the second half of the year, and therefore, average prime rental growth should moderate towards the end of the year, and we are currently forecasting average prime rental growth of 4% for 2025. Positively, the quantum of space under offer rose for the second consecutive quarter to 1.15 million sq ft, the highest since Q2 2024.

As anticipated, this year’s elevated development pipeline has put upwards pressure on the vacancy rate, which now stands at 8.1%, up 110 bps quarter-on-quarter. Several large speculative pipeline schemes over 100,000 sq ft contributed to this steep rise, including One Olympia, W14, 1 Triton Square, NW1, and The Network Building, W1, in addition to a rise in secondary space in fringe markets. However, availability in the most in-demand sub-markets remains tight, with vacancy rates in Mayfair, St James’s, and Soho all below their respective five-year averages.

West End Highlights

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