Uncertainty began to feed into central London’s office market in Q3 with take-up reaching 1.9 million sq ft, a 30% decline quarter-on-quarter and 28% below the long-term Q3 average. The lower take-up was primarily driven by a lack of larger transactions, with no deals over 100,000 sq ft completing in the City and none exceeding 50,000 sq ft in the West End. This brought year-to-date (YTD) take-up to 6.8 million sq ft, which is down 2% on Q1–Q3 2024. While take-up is currently 8% below the long-term average, it is 2% ahead of our ‘new normal’ post-Covid expectations.

In total, three transactions over 50,000 sq ft completed, the largest being law firm Bristows’ acquisition of the 4th to 7th floors of Bow Bells House, 11 Bread Street, EC4 (70,000 sq ft), on a 15-year lease.

Prime rental expectations strengthened this year, with Savills revising growth forecasts upwards in H1. Annual growth is now projected at 4.2% in the City (up 20 bps) and 4.1% in the West End (up 10 bps) for the 2025–2029 period. Current prime rents average £99.75 per sq ft in the City and £168.26 per sq ft in the West End, underlining continued appetite for best-in-class space. This demand profile is increasingly ESG-driven: 60% of leasing activity in H1 was in top-rated BREEAM buildings, up from 57% last year, while interest in older, lower-grade stock continues to decline.

Refurbishments have dominated construction starts so far this year, accounting for 75%, as landlords and developers responded to rising ESG requirements and embodied-carbon considerations. This shift reflects both cost efficiency and planning realities, with deep retrofits increasingly preferred over full redevelopment. New development starts totalled 2.3 million sq ft in Q3, bringing the YTD figure to 5.8 million sq ft, nearly matching the full-year total of 5.9 million sq ft recorded in 2024. We currently anticipate that development completions between now and 2029 will reach 26.5 million sq ft, although 31% of this pipeline is yet to start.

On the construction side, material prices eased slightly, falling 0.7% year-on-year, but remain 37% above pre-pandemic levels. Pressure persists in finishing trades and MEP packages due to high import costs and strong demand, with intermittent supply issues for fire-rated ductwork, electrical components and mechanical plant.

Looking ahead, tender price inflation is forecast at 2.75% for 2025–2026, supported by expectations of sector output recovery, though public sector weakness may temper growth. Risks remain around trade policy, with potential US–China tariffs threatening global supply chains and commodity pricing, while regulatory requirements such as Gateway 2 approvals continue to add complexity and cost.

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