City Leasing Market
Overview
The City office market demonstrated resilience in Q4 24, with 1.71M sq ft transacting, remaining 19% above the 10-year quarterly average. This marks the third highest quarterly figure of the past four years, exceeded only by Q4 23 and Q3 24, indicating sustained momentum in the market. Grade A leasing accounted for 54% of the quarterly total at 927,000 sq ft, 5% ahead of the 10-year average.
As the market enters 2025 with a mix of optimism and caution, the resilient leasing activity in 2024, particularly in the Grade A segment, demonstrates continued demand for high-quality office space. The increase in larger pre-letting transactions suggests that some occupiers are making significant commitments, driven by lease events or strategic relocations.
At the end of 2024, Prime ‘Best in Class rental rates in the City continued their upward trajectory at £95.00 per sq ft; this was 7.5% up on 2023 from £88.50 per sq ft with a flight to quality continuing to drive prime rental growth for best-in-high quality offices. Grade A office rents increased marginally to £70.50 per sq ft, up 2.8% from 2023.
The high pre-let rate (61%) for 2025 completions is encouraging, suggesting strong demand for new, high-quality space and the permanent return to the office at lease 4 days in the working week. This trend is likely driven by the occupiers' focus on ESG credentials and the need for modern, efficient workspaces to attract and retain talent.
The shortage of high-quality space remains acute, with City Core vacancy at 7.6%, Grade A vacancy at just 3.8%, and tower space now achieving sub 1% availability. With 22 Bishopsgate now fully let, 8 Bishopsgate and 40 Leadenhall are the next two close to completing their leasing campaigns with 5 floors left between the pair. This scarcity of prime stock continues the drive for best in class office space and supports the robust rental growth observed in the market.
Development Pipeline
Completions in 2024 totalled just 2.3M sq ft, the lowest figure since 2016, of which 64% was pre-let. Nonetheless, the development pipeline for 2025 looks significantly stronger, with 5.4 million sq ft of space scheduled to be delivered in the wider City. Of this space, 61% has already been pre-let, leaving 1.7M sq ft under construction and available - a figure only 8% ahead of the average from 2020 to 2023 and one which is likely to decrease as schemes let near completion.
The Gilbert, EC2
Moretown, E1
Grace Hall, EC3
The Folgate Building, E1
12 Arthur Steet, EC2
Headline Market Deals
Key completions in Q4 24 were Moody’s pre-let 110,000 sq ft at 10 Gresham St, EC2, Octopus Investments taking 91,000 sq ft at The Gilspur, EC1, Alix Partners acquiring 85,000 sq ft at One Millenium Bridge,EC2, and Morgan Lewis and Bocklus UK acquiring 76,000 sq ft at Peterborough Court.
Allsop Transactions
The City leasing team continued a run of success into Q4 24. Key completions have been Tripadvisor acquiring 26,099 sq ft at CLI Dartriver’s The Folgate Building, E1, acquiring 30,050 sq ft on behalf of Broadridge Financial Solutions Limited at CIT’s 12 Arthur Steet, EC2, UK Payments signing a new lease of 46,735 sq ft at Resolution’s Moretown, E1, Fidelis signing a new lease to take a self-contained (whole building) 19,625 sq ft at Kingboard’s Grace Hall, 147-148 Leadenhall, EC3, and OCBC acquiring 17,018 sq ft at Brookfield’s The Gilbert, EC2.