Contents

• Across the City market

• Across the West End market

Across the City market

The City market saw a strong final quarter, with 1.85 million sq ft transacting. This was 57% up on the third quarter, but down 14% on Q4 last year and up 6% on the five-year average for Q4. This is largely due to Q4 seeing the largest number of transactions of any quarter in 2025. The largest transaction of the quarter was law firm Gibson Dunn’s 153,116 sq ft pre-let of the 9^th–12^th floors at One Exchange Square, EC2 — a refurbishment due for completion in Q2 2026 — at a rent thought to be in excess of £100+ psf.

The City market has seen a robust year for leasing activity, with take-up reaching 6.2 million sq ft. This is a 6% decrease year on year, 14% above the five-year average, and just 1% down on the ten-year average. This strong performance was underpinned by several large transactions, most notably Squarepoint’s pre-let of 400,000 sq ft at 65 Gresham Street, EC2, development, with completion anticipated in 2028. Occupier demand, particularly for larger occupiers, continues to be driven by a preference for office space with strong amenity provision and sustainability credentials. In 2025, 68% of lettings were in buildings rated BREEAM Excellent or Outstanding, up from 64% in 2024.

The City Core, particularly EC2, remained the most active submarket, accounting for 59% and 40% of total take-up, respectively. SE1 experienced the largest increase in take-up of any submarket, with a 45% increase in take-up compared to 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, along with Service Now’s pre-letting of the 22^nd–26^th floors of Edge London Bridge, 9 Fenning Street, SE1 — a new tower scheme with the top sustainability credentials set to complete construction in the final quarter of 2026.

At the end of 2025, City supply stood at 9.7 million sq ft, which equates to a vacancy rate of 7.0%. This is 90 basis points (bps) down from the end of 2024 and down 40bps from last quarter. Significant additions to the pipeline this quarter include 200 Gray’s Inn Road, EC3 (140,000 sq ft), One Golden Lane, EC1 (112,000 sq ft), and Fresh Wharf, EC3 (136,000 sq ft), although a significant proportion of the building is already under offer. Strong demand for new office space in well-located, amenity-rich, and core locations has kept prime supply levels low. For example, at the end of Q4, the average City tower vacancy rate stood at 2.9%, falling further to 2.2% when under-offers are included. When looking at the prime towers, this vacancy rate is as low as 0.9%, and just 0.2% when considering under-offers.

The stronger preference for core submarkets is evident, with the City Core vacancy rate at 5.7%, down 110bps on Q4 2024 and down 240bps on the ten-year average. This is compared to the City Fringe vacancy rate, which currently stands at 8.2% and is down 70bps on Q4 2024 but 170bps above its long-term average.

2025 has been another year of strong rental growth. Prime rents are up 6.8% on 2024, sitting at £105.26, surpassing the 5.5% we expected at the start of the year. Grade A average rents reached £74.34, up 4.1% on last year. The top rent achieved in 2025 was at prime tower, 8 Bishopsgate, EC2, where law firm Proskauer Rose expanded into the 46^th floor on a 13-year lease, paying £145.00 psf. This highlights the rental premium paid for best-in-class space, particularly towers with the best sustainability ratings. With limited availability and strong demand for premium tower space, this record is likely to be surpassed in the near future.

City Highlights

Across the West End market

Typically, the final quarter of the year sees over 1 million sq ft of take-up as occupiers look to complete transactions before year-end. However, leasing activity totalled 779,856 sq ft, which was broadly in line with the previous quarter but 31% below the ten-year average. The reduction in activity was largely due to a squeeze in both the number of smaller (sub-10,000 sq ft) and larger (25,000 sq ft+) transactions completing, with both size brackets recording their fewest transactions since 2020.

For 2025 overall, it was a similar story, in which 3.27 million sq ft was recorded, down 7% and 21% on the five- and ten-year averages, respectively. An absence of larger transactions over the course of the year weighed on take-up levels, with just 23 over 25,000 sq ft completing — the fewest since the pandemic — as several large under-offers failed to exchange before the end of the year. Similarly, there was a 16% fall in the number of sub-10,000 sq ft transactions compared to the ten-year average as uncertainty remains heightened among smaller occupiers. Positively, however, mid-size deals have remained resilient, with the number of 10,000–25,000 sq ft transactions at the highest levels since 2022 and only marginally below the long-term average.

The Insurance & Financial Services sector continues to drive activity in the West End, accounting for over 32% of take-up, particularly private equity, which was the most acquisitive sub-sector. In fact, the largest transaction to complete saw Ares Management pre-let the entirety of The Crown Estate’s 1 Hanover Street, W1, scheme in the second 100,000 sq ft+ transaction of 2025, following another Mayfair pre-let at 7 Brook Street, W1, earlier in the year. This follows several other large transactions from private equity firms, including Clayton, Dubilier & Rice (CD&R) and General Atlantic.

This sustained demand from the Financial Services sector has led to strong rental performance, particularly for average prime rents, where there has been growth of 6.1% year-on-year to £166.61 per sq ft. Furthermore, four of the five submarkets where record rents were achieved in 2025 resulted from financial occupiers.

The vacancy rate fell by 40bps to 7.9%, the first quarter-on-quarter fall since Q1 2025, following a more limited level of supply additions, particularly from the development pipeline, relative to recent quarters. Whilst the overall vacancy rate is still elevated, the disparity in supply between central, well-connected locations and fringe markets remains evident. Submarkets that saw a sizeable contraction in availability include King’s Cross, where supply has fallen by over a third year-on-year and vacancy is at the lowest level in almost four years. Additionally, North of Oxford Street (West) saw availability fall by a similar margin in large part thanks to the third-highest levels of leasing activity we have recorded for that market. In contrast, fringe areas such as Hammersmith (26.4%) and Vauxhall/Battersea (18.1%) continue to experience stubbornly high levels of vacancy.

The delivery of new stock is expected to accelerate in 2026 as several large schemes originally due in 2025 were pushed back. Consequently, completions are expected to reach 3.7 million sq ft in 2026, of which 33% has been pre-let, before falling off to more typical levels in 2027 and 2028. However, development starts also fell in 2025 to 1.7 million sq ft, 28% below the ten-year average, and with almost 40% of the 2026/30 pipeline yet to commence construction, delays to completion dates will likely persist in the near term.

West End Highlights

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