Contents

• Leasing summary
• Take-up by sector
• Future demand
• Supply and vacancy
• Development pipeline
• City and West End rents
• Central London investment

Leasing summary

• Central London take-up totalled 2.63 million sq ft in Q4, with 188 transactions completed. This was down 19% on Q4 2024 and sits 13% below the ten-year long-term average. Despite the more subdued end to the year, four transactions sized over 100,000 sq ft completed during Q4, bringing the annual total for the year to ten, the highest number of transactions for this size band in three years.

• Notable Q4 transactions include Gibson Dunn’s pre-letting of the 9th–12th floors (153,116 sq ft), and FTI Consulting’s pre-let of the 1st–3rd (144,452 sq ft) at PNB’s 1 Exchange Square, EC2. In the West End, the largest transaction to complete was also a pre-let with Ares Management exchanging on the Crown Estate’s 1 Hanover Street, W1 (123,996 sq ft), on confidential terms.

• This brought year-to-date take-up to 9.43 million sq ft, which was up 5% on the five-year average but down 9% on the ten-year average, bringing it in line with our leasing expectations for 2025. City take-up for the year stood at 6.2 million sq ft, which was down just 1% on the ten-year average as the market continues to experience robust demand, particularly across the City Core sub-market.

• The absence of a higher volume of large-scale transactions throughout the year contributed to weaker West End take-up. At 3.27 million sq ft, West End take-up was down 21% on the long-term average and 7% on the five-year average.

• The preference for high-quality space was evident, with lettings in recently developed or comprehensively refurbished offices accounting for 77% of space acquired during 2025. Space let in BREEAM Outstanding or Excellent office buildings represented 64% of space acquired during 2025, up 5% on 2024.

• With no indication of any material shift in demand for high-quality office space, we are forecasting that take-up in 2026 will reach 10.5 million sq ft, which is broadly in line with the long-term average.

Take-up by sector

• The Insurance & Financial sector remains the primary driver of leasing activity across Central London. While overall take-up eased from the record levels seen in 2024, sector take-up still ranked as the fourth-highest on record, reflecting continued robust demand from the sector. Overall, the Insurance & Financial Services sector accounted for 31% of space acquired in 2025, with strong demand from Hedge Funds, Asset Management and Insurance firms significantly boosting sector activity. And at 2.8 million sq ft, Insurance & Financial Services sector take-up is up 32% on the ten-year average.

• 2025 also witnessed a resurgence in activity from the Tech & Media sector, with the number of transactions completing to the sector reaching its highest level since 2019, driven by strong demand from the Software/App sub-sector. Overall, the Tech & Media sector accounted for 16% of space acquired during 2025. Yet total demand from the Tech & Media sector has not fully recovered; at 1.5 million sq ft, it remains 29% below the ten-year average. Similarly, the average deal size at 10,151 sq ft is down 29% on the average size recorded a decade ago.

• The Professional Services sector followed with the third largest share of take-up, with demand from the sector having softened over the year. At just over 1 million sq ft, sector demand was down 14% on the ten-year average. Despite this, demand from the Legal sub-sector remained robust and reached its highest level since the record set in 2022.

• While the Public Services sector accounted for 7% of take-up, there has been a notable uptick in activity from the sector, with overall take-up boosted by the London School of Economics’ acquisition of Centrium, 61 Aldwych, WC2 (162,562 sq ft).

• While the number of transactions to Serviced Office Providers has remained broadly stable over the past three years, overall space take from the sector has declined, with take-up down 21% compared with 2024. A further 28 centres were acquired over the year, the largest of which was Huckletree’s acquisition of the auditorium and second floor (47,783 sq ft) at 40 Leadenhall on a management agreement.

Future demand

• By the end of 2025, we saw a slight cooling to demand, with active Central London requirements standing at 12.4 million sq ft, down 8% on Q4 2024, with the year witnessing a softening in demand from the Financial Services sector.

• The year was also characterised by higher levels of renewals activity, particularly amongst larger occupiers and notable occupiers extending their leases, including EY at 1 More London Place, SE1, Accenture signing up to a five-year extension at 30 Fenchurch Street, EC3, and Investec at 30 Gresham Street, EC2. Despite this, overall Central London demand was up 35% on the long-term average, with more occupiers starting searches earlier and undertaking stay versus go exercises.

• Despite the reduction in activity from Insurance & Financial sector occupiers, the sector still accounted for the largest share of active requirements, with 3 million sq ft (24% of overall demand). Collectively, demand across the Insurance, Financial & Banking sectors is up 56% on the ten-year long-term average, reflecting the continued strength of wider Financial sector activity, even as momentum eased toward the end of the year.

• The Insurance & Financial sector was followed closely by the Professional Services sector with a 24% share of active demand, with law firms and accountancy firms currently based in the City, continuing to sustain the elevated level of demand we have seen from this sector over the past two years, and holding it broadly stable at this level.

• Q4 saw a rebound in Tech & Media sector demand, bringing overall take-up to 2.5 million sq ft — its highest year-end total in well over a decade and 45% above the long-term average. The pick-up in activity was largely driven by growing demand from the Software/App and AI subsectors.

• There is yet to be any indication that more occupiers are seeking to downsize their office space. Overall, there are more occupiers seeking to increase their space (52%) than seeking to reduce it (13%). Occupiers seeking to decrease their office space fell by 3% compared with Q4 2024, while the overall percentage of occupiers seeking to increase their space was down 2% on the same period.

Supply and vacancy

• Supply across Central London stood at 19.5 million sq ft at the end of Q4. This equates to a vacancy rate of 7.4%, which represents a 40bps fall on the previous quarter and 10bps fall on Q4 2024, with limited new stock being added to the market at the end of the year. While Central London supply is down, it remains 110bps above the long-term average, with supply in the West End at elevated levels.

• Both the City and West End recorded a decline in supply over the quarter, with vacancy rates reaching 7.0% and 7.9%, respectively. The City vacancy rate is now just 10bps above the ten-year long-term average.

• While the overall vacancy rate for Central London, as a whole, remains above average, strong demand for new office space in well-located, amenity-rich, and core locations has kept prime and core supply levels low. For example, at the end of Q3, the average Grade A City tower vacancy rate stood at 2.9%, falling further to 2.2% when under-offers are included.

• The stronger occupier preference for the core was evident, with the City Core vacancy rate at 5.7%, down 240bps on the ten-year long-term average. This is compared to the City Fringe vacancy rate, which stood at 8.2% and was 170bps above its long-term average. In the West End, the Core (Mayfair/St James’s) vacancy rate at the end of Q4 stood at 4.1% and was down on the ten-year average of 5.1%. This compares with West End Fringe sub-markets such as Hammersmith and VNEB, where Q4 vacancy stood at 26% and 18%, respectively.

• At the end of Q4, 46% of space available (8.9 million sq ft) was BREEAM-rated Excellent or Outstanding, which is up 3% on Q4 2024.

• 50% of supply comprises of floorplates under 5,000 sq ft and at the larger end of the scale, there are currently 27 Grade A options available now or in the next six months for occupiers seeking to acquire 100,000 sq ft or more. However, options remain far more limited for those seeking to be more centrally located, with only five of these options in the City Core and six across West End Central sub-markets.

Development pipeline

• Development completions in Q4 reached 1.6 million sq ft, which was up 42% on the previous quarter and brought completions for the year to 6 million sq ft. This is the highest level of development completions we have seen in nine years.

• Notable schemes reaching practical completion during Q4 include Brookfield’s fully pre-let One Leadenhall, EC3 (430,000 sq ft), Tishman Speyer’s Angel Square, EC1 (185,000 sq ft), and BEAM’s fully pre-let 50 Berkeley Street, W1 (175,000 sq ft).

• With several schemes pushed into 2026, completions for the year are currently expected to reach 8.6 million sq ft, around a third of which is already pre-let. However, nearly 31% of the 2026 pipeline is scheduled for Q4, and given typical delays, it is unlikely this peak will be achieved. Completions are therefore more likely to align with 2025 levels.

• Overall, based on our analysis of the development pipeline (with a view on schemes with a realistic prospect of delivery over the next four years), completions are set to reach 24.4 million sq ft, 20% of which has already been pre-let. Construction on over a third (34%) of space scheduled for delivery over this period has yet to start, with elevated costs and viability continuing to remain a challenge.

• Although development starts reached 6.4 million sq ft and were 6% above the long-term average, this was driven almost entirely by record activity levels in the City Core. Notable new starts in the City Core included 50 Fenchurch St (approximately 670,000 sq ft), Dovetail (465,000 sq ft), and 65 Gresham St (380,000 sq ft). Despite this pick-up in development starts in the City Core, with 27% of the pipeline already pre-let and a further 5% under offer, supply in the City Core is expected to remain constrained. When development starts in the City Core were excluded, Central London development starts were down 9% on the long-term average.

• There has been a notable shift toward refurbishments, with comprehensive refurbishments accounting for 65% of the number of schemes set for delivery over the next four years (51% by sq ft), up 4% on the proportion at the end of Q4 2024.

City and West End rents

• As a result of the sustained preference for best-in-class space and the vacancy rate for prime top-tier towers in the Core standing at just 0.9%, the average City Prime rent reached a new record high of £105.26 per sq ft, which was up 6.8% on the previous year. In addition to this, a new record top rent was achieved in the City at 8 Bishopsgate, EC2, with law firm Proskauer Rose expanding onto the 46th floor on a 13-year lease at £145.00 per sq ft.

• The West End market also saw strong average prime rental growth over the year, with the average Prime rent standing at £166.61 per sq ft, up 6.1% year-on-year. This strong growth resulted from several prime transactions in the core completing, including the whole of 7 Brook Street, W1, to McDermott Will & Schulte, and the whole of 30 Duke Street, SW1, to CD&R. Both deals were reported to have overall blended rents at c. £187.00 per sq ft. There were also top rents achieved outside of the core, including Battery Ventures, which acquired the top floor of Arthur Stanley House, W1, for £156.50 per sq ft, in addition to Aermont Capital leasing the 6th floor at 30 Broadwick Street, W1, for £160.00 per sq ft, both record rents for their respective markets.

• With the sustained preference for Grade A office space remaining, the average Grade A rent for the City at the end of the year stood at £74.34 per sq ft, which is up 4% on 2024, and the West End average Grade A rent stood at £99.58 per sq ft, up 5% on 2024.

• Based on the assumption of continued polarised occupier demand, we are forecasting prime rental growth of 4.3% across both markets in 2026. Overall, we are forecasting average prime rental growth of 4.2% per annum for both the City and the West End over the next five years.

• By contrast, we are currently forecasting -1.5% rental growth for Grade B rents in 2026 and 0% in 2027, reflecting weakened demand for this product. However, expect to see some modest rental growth to return for Grade B rents in 2029 as a result of low supply of newer quality office space combined with stronger rental growth for this product, resulting in a slight pick-up in demand for Grade B space from tenants priced out of Grade A options.

Central London investment

• Central London saw investment activity rebound in Q4, with turnover reaching £3.67 billion — the highest quarterly turnover since Q3 2022 — with 74 assets trading, including nine over £100 million, during the final months of the year.

• This brought turnover for 2025 to £9.88 billion across 220 transactions, which is up 48% on 2024 turnover, with both the volume and the number of assets trading up on the previous year. However, despite the recovery witnessed at the end of the year, overall turnover remains 29% down on the ten-year long-term average and down 2% on the five-year.

• Increased liquidity at the top end of the market was evident in the rise in £100 million+ trades, with 23 assets transacting at this level, up from 12 in 2024. Overall, the number of assets trading over the year was also the highest volume seen since 2019, with sub-£20 million transactions at their highest point since 2018 and the volume of £20–£50 million assets being traded continuing to remain at a high level.

• The largest transaction to complete during Q4 in the City was Capreon and Hayfin Capital Management’s acquisition of the long leasehold interest in 70 St Mary Axe, EC3, from Nuveen for £331 million, reflecting a 5.81% net initial yield. In the West End, the largest Q4 transaction was Royal London’s acquisition of 1 Newman Yard, W1, from GPE for £250 million, reflecting a 4.48% net initial yield.

• Domestic purchasers continued to account for the largest share of turnover, representing 39%, with £3.7 billion acquired by UK purchasers. However, there was a notable resurgence in overseas investor activity after their share of turnover fell to an 18-year low. Overseas investors acquired £5.9 billion over the year — up 61% on the previous year — with overseas investors accounting for 65% of all assets trading above £100 million, illustrating the scale of renewed activity.

• Positive investor sentiment has carried into the new year, with £3.3 billion of assets under offer at the end of Q4, the highest year-end level we have seen since 2021 and activity levels are expected to recover progressively over the course of 2026.

• Savills prime West End yield remains at 3.75% and the City at 5.25%.

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