City Leasing

Overview

The City office market demonstrated resilience during Q1 2025, despite experiencing a downturn in leasing activity. Take-up reached 1.4M sq ft, representing a modest quarter-on-quarter reduction compared to the wider London market's more pronounced decline. This figure sits just 1% below the 10-year quarterly average, signalling continued market stability amid challenging economic conditions.

The City continues to dominate London's pre-letting landscape, accounting for an impressive 67% of pre-leasing agreements secured over the past ten quarters. This trend underscores occupiers enduring confidence in the City's long-term prospects, even as immediate market dynamics evolve. At quarter-end, eleven units exceeding 50,000 sq ft remained under offer, with eight located in either development schemes or newly completed buildings. The standout opportunity is 65 Gresham Street, EC2 where 375,000 sq ft is close to completing - a transaction that will significantly impact Q2 figures when issued. The Lego transaction is also likely to increase the take up for the Southbank.

Grade A product accounted for 63% of total transactions in Q1, aligning closely with the London-wide figure of 62%. This represents a notable shift from previous quarters, reflecting evolving occupier priorities. We are witnessing growing demand for second-hand fitted space alongside increasing requirements for lease flexibility. Landlords’ upcycling of space and improving EPC ratings have encouraged the demand.

City prime rents maintained their upward trajectory in Q1 2025, reaching £91.50 per sq ft —an impressive 11% increase year-on-year. This robust growth occurs despite broader economic uncertainties, highlighting the persistent imbalance between supply and demand for top-tier space. Looking ahead, we anticipate continued upward pressure on both prime and premium rents throughout 2025, regardless of wider global economic conditions. The fundamental supply-demand dynamics driving the City market appear set to override external headwinds in the near term.

The scarcity of high-quality space remains acute, with City Core vacancy continuing to decrease, with the City now witnessing rates at 7%, and Grade A vacancy at just 3.3%. Towers continue their march with 8 Leadenhall, EC3 holding back their top floors to hit record rents, and 40 Leadenhall, EC3 only having 2 part floors available.

The City fringes remain challenging with limited take up experienced for larger units in excess of 15,000 sq ft.

Development Pipeline

The speculative development pipeline for 2025 in the City core currently exceeds the 10-year average by nearly 50%. Premium options remain limited, with just four new Grade A schemes offering units above 50,000 sq ft. This scarcity continues to drive the flight to quality observed in recent quarters. Of the 672,000 sq ft under construction and scheduled for delivery between Q2 and Q4 2025, 75% comprises refurbished space rather than new-build. This predominance of refurbishments reflects developers' adaptation to sustainability imperatives and changing market conditions.

Headline Market Deals

Key completions in Q1 2025 were Simmons & Simmons pre-let of 155,000 sq ft at 25 Finsbury Avenue, EC2, Knight Frank's pre-let of 72,500 sq ft at 1 Liverpool Street, EC2, Trainline acquiring 60,000 sq ft at Stonecutter Court, EC4, Huckletree acquiring 47,500 sq ft at 40 Leadenhall, EC3, and PayPal acquiring 40,000 sq ft at 76 Southbank, SE1.