A Recap of London’s Prime Office Market in 2023

A Recap of London’s Prime Office Market in 2023
A Recap of Londons 
Prime Office Market 
in 2023

A Recap of London's Prime Office Market in 2023

As the world grappled with uncertainties, the heart of London’s business district saw record headline rents and robust leasing activity, underscoring the city’s enduring appeal to occupiers and investors.

Total take-up of office space in central London reached 12.7 million square feet, a slight dip from the previous year but notably punctuated by a surge in large-scale transactions. Leading the charge was HSBC’s monumental lease of 556,000 square feet at 81 Newgate, heralding the largest deal since 2018 and signalling confidence among major occupiers.

Fueling this momentum was the strong real estate rental growth observed across nearly all locations, with certain submarkets such as Clerkenwell and Farringdon hitting unprecedented highs. According to The Occupier Report the allure of best-in-class prime office spaces propelled average grade-A rents to £81.40 per square foot, underscoring the premium placed on quality and functionality by discerning tenants.

Districts like Soho consistently raised the bar each quarter. This surge has propelled five markets to surpass the £100.00 per square foot threshold, a significant increase from just one market at the close of Q4 2022.

Amidst the evolving landscape, the City of London emerged as the epicentre of leasing activity, commanding 49% of total take-up. Noteworthy was the Southbank’s ascent, witnessing increased traction driven by the allure of Grade A spaces coupled with sustainability credentials, exemplified by the uptake at the Blue Fin Building.

However, while the City thrived, the West End experienced a small downturn in activity, this has been attributed to a dwindling supply. Upon closer examination of the West End, each of its submarkets experienced a surge in Grade A space, averaging a remarkable 104% increase in Grade A, compared to Q4 2022, notably with a threefold expansion in King’s Cross-Euston.

Despite the market’s resilience, rising vacancy rates emerged as a point of concern, reaching a 20-year high of 24.5 million square feet by the end of Q4 2023. Yet, this surge was not indicative of market volatility but rather, in Stanhope’s leasing director Charlie Russell-Jones opinion “reflective of a flight to quality” —a strategic manoeuvre by occupiers seeking premium spaces amid evolving workplace dynamics.

Looking ahead, the trajectory for real estate investors remains optimistic, with projections of continued rental growth in 2024 and 2025, particularly for top-quality spaces. As the central London office market navigates through uncertainties, the steadfast emphasis on quality, sustainability, and functionality is underpinned. Beyond the transient challenges, the resilience of London’s prime office market underscores its enduring appeal as a global business hub, steadfast in its commitment to adapt and thrive amidst evolving dynamics.

Published: May 13 2024
Author: Byron Baciocchi

A Recap of London's Prime Office Market in 2023

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