London Office Rent Guide 2023
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/ Office Rent in London – A Guide for 2024

Office Rent in London – A Guide for 2024

Dr. Greg Dooley - Design and Build Specialist

Dr. Greg Dooley

Digital Marketing Manager

Content Specialist in Office Design & Build

London Office Rent Market Overview

The cost of London office rent is one of the recurrent questions we encounter from clients. The cost of rent varies significantly depending on the grade of the office and the area, with central locations and higher-spec offices commanding the highest prices. Office rent in London can range on average from as low as £20-30 per square foot for Grade B spaces in less central locations to over £145 per square foot for Grade A spaces in premium areas like St. James’s and Mayfair. The highest rent on record in the UK, and also thought to be the world’s highest rent, is £277.50 per sq ft, for a 2,700 sq ft office space on the sixth floor at Mercury’s 30 Berkeley Square in Mayfair.

Recognising the importance of having up-to-date, and actionable insights on the cost of office space, we have curated a guide to office rent in London. This guide intends to assist businesses in navigating the multifaceted landscape of London’s commercial real estate, balancing both their spatial needs and budgetary constraints.

A review of the cost of office space in London in 2023 shows a complex landscape, undergoing transformative changes that echo global shifts in work culture, technology and an increased interest in sustainability. It is also one driven by economic factors and evolving tenant demands. Research from second quarter 2023 property reports shows a take-up of space in Central London totalling 2.0 million sq ft, a decrease of 7% from the previous quarter and 20% below the 10-year Q2 average. This marks the fourth consecutive quarter of take-up decrease, primarily impacting older, lower-quality spaces which have struggled to lease.

For a quick overview of office rent in London see our map below.

London Rent Report 2023
A Map Showing London's Grade A and Grade B Rent Ranges.

Prime Rent in London

There are bright spots within the London office rent market, particularly for high-quality spaces. Under offers increased by 28% from Q1, ending the quarter at 4.1 million sq ft. In particular, under offers for new space increased by 156%, highlighting a continued interest in the best-in-class office spaces. In fact, the five largest units under offer were either under construction or newly completed development schemes.

13 pre-lets were negotiated during Q2 2023, comprising 505,000 sq ft and accounting for around a quarter of the total Q2 leasing volumes. Among these agreements, key transactions were Chanel located at 38 Berkeley Square, W1; Latham & Watkins at One Leadenhall, EC3, and Dentons at One Liverpool Street, EC2. With the limited availability of high-quality spaces, it’s anticipated that this trend towards pre-letting will persist. Occupiers are now looking further into the future to secure premier properties that will meet their specific needs.

Availability remained broadly stable at 25.5 million sq ft, with older and lower quality secondhand space (Grade B) accounting for 67% of the total figure. New early marketed space, not ready to occupy but will become so within 12 months, saw a decrease of 6% quarter-on-quarter in Q2.

The investment volumes showed a decrease to £1.2 billion in Q2 from £1.7 billion in the previous quarter, underscoring the cautious investor sentiment. The downturn is attributed to high debt costs, leading to fewer active buyers. However, the overall picture is one of nuanced shifts rather than a broad decline. There’s a clear focus on premium, well-located properties, as indicated by the 45% increase in space (12.7m sq ft) that was let or under offer at the end of the quarter.

City of London & Southbank Office Rent

The City of London and South Bank witnessed an upswing in Q2 office rentals. With approximately 1.3 million sq ft let it mirrored a 19% progression from Q1 and paralleled the long-term Q2 norm. Prominent transactions such as Goodwin Procter’s 90,000 sq ft acquisition at Sancroft, EC4, and Dentons LLP’s 67,000 sq ft pre-let at One Liverpool Street, EC2, exemplified the surge.

City of London & Southbank Office Rents
AreaGrade A Rent (per sq ft) Grade B Rent (per sq ft)
City£75 - £95£68 - £70
Battersea£40 - £63£20 - £30
London Bridge & Southwark£65 - £78£55 - £60
Vauxhall£58 - £60£35- £42

West End & West London Office Rent

London’s West End, Q2 office rental activity was subdued, registering just 634,000 sq ft, a significant decrease from the 1.3 million sq. ft during the same period in 2022. However, the banking & finance sector remained a dominant force, accounting for 35% of the quarterly leasing volumes. Areas like Mayfair and St. James’s are also seeing rising interest and premium rents.

West End London Office Rents
AreaGrade A Rent (per sq ft) Grade B Rent (per sq ft)
St. James’s£135 - £145£68 - £83
Mayfair£125 - £135£83 - £87
Soho£98 - £105£70 - £80
Knightsbridge & Belgravia£88 - £93£57 - £65
Marylabone£85 - £95£58 - £68
Covent Garden£75 - £85£55 - £73
Fitzrovia£93 - £95£60 - £70
Victoria£85 - £90£58 - £63
Paddington£75 - £83£55 - £65
West London Office Rents
AreaGrade A Rent (per sq ft) Grade B Rent (per sq ft)
Chelsea£80 - £97£38 - £48
Kensington£70 - £85£38 - £48
Hammersmith£55 - £60£35 - £45
White City & Shepherd's Bush£57 - £63£35 - £45
Fulham£48 - £59£38 - £40

Mid Town Office Rent

In Q2, Midtown’s real estate market saw a decline, with take-up just under 65,000 sq ft, 36% down from the previous quarter. There were no large transactions over 20,000 sq ft, and the largest was 18,837 sq ft at 75-80 High Holborn, WC1. The vacancy rate decreased for the third consecutive quarter to 5.4%, still above the 10-year average of 4.3%. Prime headline rents remained stable at £76.67 per sq ft.

Mid Town Office Rents
AreaGrade A Rent (per sq ft) Grade B Rent (per sq ft)
Holborn£75 - £78£60 - £65
Bloomsbury£68 - £83£62 - £65

London’s Tech Belt

There was a significant decline in take-up in London’s Tech Belt, amounting to just over 107,000 sq ft, marking a drop of 63% from the prior quarter and nearly 73% below the decade’s quarterly average. The most notable transaction involved Pentland Brands acquiring 30,896 sq ft at The Johnson Building, Hatton Garden, EC1. The activity was primarily led by the Consumer & Private Services sector at 29%, followed by the TMT & Creative and Professional Services sectors. Despite the recent peak, the vacancy rate moderated to 9.3%. Prime rents witnessed a marginal decrease, averaging £73.33 per sq ft, although the Clerkenwell & Farringdon submarket retained the highest prime rent at £92.50 per sq ft.

London's Tech Belt Office Rents
AreaGrade A Rent (per sq ft) Grade B Rent (per sq ft)
Euston & King’s Cross£65 - £88£50 - £68
Camden£60 - £68£48 - £55
Clerkenwell & Farringdon£70 - £93£55 - £65
Old Street & Shoreditch£65 - £75£50 - £58
Aldgate & Whitechapel£53 - £58£35 - £45

East London Office Rent

East London saw a 37% decline in leasing with six notable lettings, mostly in Docklands, totaling over 70,000 sq ft. The vacancy rate rose to 16.5% due to increased availability, and minimal construction and investment activities signal a cautious rental market ahead.

East London Office Rents
AreaGrade A Rent (per sq ft) Grade B Rent (per sq ft)
Canary Wharf£50 - £55£32 - £40

Grade A and Grade B Rent

Grade A office space is typically new, pristine, recently built, or recently fitted-out space that includes finishes such low energy lighting, efficient HVAC/ventilation systems, enhanced natural lighting, high-end toilet and reception areas or lift lobbies and other high-end finishes such as metal pan ceilings. Grade A is typically the top tier of the market, often in high demand, with high asking prices for rent reflecting quality and location.

In contrast, Grade B offices are lower-spec spaces, typically being at least 30% less expensive than Grade A spaces. They are characterised by second-hand, older space, typically not in non-prime locations of city centres, and often without air conditioning / HAVC.

Post-pandemic, the requirements for hybrid working, enhanced ventilation systems, and higher quality have driven demand for Grade A office space, while at the same time reducing demand for Grade B.

Rolls Royce Entrance to Building

From Prime Rents to Super Prime Rents

London’s commercial real estate landscape for Q2 2023 continues to reflect a nuanced scenario, as recent data from Avison Young, JLL, and Knight Frank illustrate. Prime rents in London’s core hubs remain stable, while the City currently averages around £75 per sq ft and the West End around £130 per sq ft. However, there’s an emergent trend of super prime rents in areas like Mayfair, and St James’s, as well as new developments across the City, seeing premiums as high as 35%.

In stark contrast, prime space availability is constrained relative to demand. Despite the overall availability increasing by 7.5% to 25.8m sq ft this quarter, prime space is concentrated in fewer buildings. In the core City and West End submarkets, only 15 buildings above 60,000 sq ft are available. This tightening of prime space is exacerbated by the fact that 58% of all market availability is new or refurbished, but these only account for 43.3% of the buildings.

The post-pandemic recovery is led by a flight to superior-quality buildings. Notably, the legal sector has dominated this movement, as exemplified by deals like Goodwin Proctor’s acquisition at Sancroft and Dentons LLP’s pre-let at 1 Liverpool Street. These transactions have boosted the professional services sector’s take-up, accounting for 27.7% of all deals, and surpassing trend levels by 61.8%. Additionally, financial entities, particularly non-banking financials, were also active, exceeding long-term averages by 15.4%.

Angola LNG Office Design and Build London

Key Trends and Shifts in London’s Office Landscape

1. A Turn Toward “Uber-Luxurious” Office Spaces

A recent Economist article writes on a significant and ongoing trend in the demand for prime space in London, with rates rising to £135.00 per sq ft in the West End Core. Before the pandemic, workstations accounted for about 60% of office space. Now, refurbished and new offices are dedicating half that space to workstations, increasing the share for amenities from 5% to 20%. In London, properties like 105 Victoria Street expanded green spaces, adding up to 30,000 square feet of amenities like urban farms and “walk-and-talk” tracks.

Along with this, there is a surge in luxury features like meditation rooms, bike storage, showers, outdoor spaces, and even concierges and rooftop bars, all aimed at making life as comfortable as possible for workers. It’s not just about luring them back to the office but also aiding recruitment in a competitive labour market.

Platinum Equity - K2 - Marek Sikora Photography - Small-20

2. An Exodus from Traditional Financial Hubs

Recently, financial districts like London’s Canary Wharf are feeling the strain of shifting trends in London’s commercial property market. Major tenants, including banks like HSBC and Credit Suisse, are exiting traditional financial districts, leaving the ageing skyscrapers in the area vacant. This exodus has been triggered by a post-pandemic shift in working styles which is reducing the need for vast office spaces.

Recognising the need for a “new purpose,” the Canary Wharf Group (CWG) is shifting its focus towards diversification including the science, retail, and housing sectors. With the ongoing development of Britain’s first laboratory skyscraper at North Quay, Canary Wharf aims to “redraw the life sciences map of London.” Residential projects such as Wood Wharf also signal a move towards creating a mixed-use community with leisure facilities, green spaces, schools, and medical services, reflecting a shift in what Londoners want from their city.

As Shobi Khanm – Chief Executive of the Canary Wharf Group (CWG) explains:

London is undergoing constant reinvention as the needs of its diverse, growing population change … Eight years ago, we recognised that Londoners increasingly wanted to live and work in vibrant communities with green space, leisure facilities, shops, restaurants, schools and medical services — all within easy reach.

This reinvention includes the transformation of Canary Wharf into a more vibrant community that serves the changing needs and lifestyles of its residents and businesses. The Canary Wharf 2.0 initiative is a prime example of this transformation, already making the estate home to over 3,500 residents.

The transition from traditional financial centres is not simply a matter of vacancy but an opportunity for reinvention and diversification. The ability to adapt to these changes will shape the future of London’s financial districts, positioning them to thrive in a new era of work and community life.

Office Furniture - US Investment Firm

3. Emphasis on Mixed-Use Locations

Contrary to the decline in London’s traditional financial hubs, Mayfair is booming. The appeal of locations closer to amenities such as shops and restaurants, along with the move towards smaller and more flexible office spaces, is driving this trend.

To breathe new life into these regions, urban planning is shifting towards mixed-use spaces that combine residential, retail, and offices, following the “15-minute city” concept (communities where all essential services and amenities are accessible within a 15-minute walk or cycle ride from people’s homes). The emphasis on more integrated, convenient, and lifestyle-oriented spaces means that traditional financial districts must evolve to avoid obsolescence.

4. Rising Vacancy Rates and Challenges

Vacancy rates are soaring in once-bustling financial districts. The rate has reached 15% in Canary Wharf, with similar trends observed elsewhere in Europe. These high vacancy rates present a high-risk investment challenge, threatening to turn these districts into ghost towns.

5. London Tech Hubs and Growing AI Sector

With burgeoning technological capabilities, London is becoming one of the leading global hubs for technology and artificial intelligence (AI). Its unique positioning has already drawn some of the most prestigious organisations in the field. OpenAI’s decision to choose London for its first international office marks a significant milestone, reflecting the city’s strategic importance in expanding the frontiers of artificial general intelligence (AGI).

In addition to OpenAI, London has attracted other key AI establishments like DeepMind, Google’s renowned AI lab situated in Kings Cross, and Anthropic, which has also opened an office in the city. Palantir Technologies, a specialist in data analytics, has selected London as its European headquarters for AI research and development. With 10 offices in Europe and approximately 850 UK-based employees, Palantir’s decision accentuates London’s allure for firms scaling up their focus on AI. The presence of such technological giants is a testament to London’s appeal, and it undoubtedly benefits from the UK tech sector’s distinction as the #1 in Europe and #3 globally, indicative of the sector’s resilience and continuous growth.

Rolls Royce Office Design and Fit Out
Rolls Royce Workplace Meeting Area

6. A Flight to Quality – Prime Rent in London

The “flight to quality” in London’s office space market is more than a mere trend, reflecting a broader shift towards environmental and sustainability goals. This focus on quality is an intelligent investment strategy that resonates with the current economic landscape. Assets that do not align with investor and occupier expectations are becoming increasingly marginalised, fuelling a movement towards buildings that epitomize quality, flexibility, and sustainability.

Despite facing challenges, London’s office market remains resilient, adaptable, and innovative. Adaptation to new conditions is an economic necessity and an opportunity to reimagine London’s office spaces. Embedding quality, flexibility, and sustainability at its core is not just a response to market forces, but a proactive embrace of a more responsible future.

7. EPC Regulations and Their Effect on Office Space Quality

The year 2023 is a transformative period for London’s office rents, and new regulations are setting the pace. EPC rating regulations, effective from April 2023, define the roadmap for energy efficiency in commercial properties. The requirement for buildings to reach a standard rating of ‘E’ is poised to rise to ‘C’ by 2027 and ‘B’ by 2030.

From April 2023, landlords of commercial properties in England and Wales are prohibited from letting properties with an EPC rating of ‘F’ or ‘G’ (sub-standard), unless exemptions are in place. These regulations have become a significant factor in shaping trends in London’s office space development, refurbishments and letting. This regulatory alignment with environmental priorities furthers the flight to quality in the market, reinforcing London’s commitment to sustainability.

8. ESG, BREEAM and Net Zero Carbon Buildings

The growing significance of Environmental, Social, and Governance (ESG) factors, alongside BREEAM certifications, has become an essential consideration in London’s real estate market, especially within the prime office space. This trend is highlighted in a recent report from Knight Frank’s Sustainability Series, focusing on how BREEAM certifications impact prime Central London office rents.

BREEAM, which stands for Building Research Establishment Environmental Assessment Method, was first established in Watford, north of London, in 1990. Recognised as the world’s leading sustainability assessment method, BREEAM ensures that buildings are more durable, resilient, and eco-friendly, often resulting in payback within 2-5 years through utility cost savings alone.

The research, conducted in collaboration with BRE, utilised a hedonic regression model to quantify the effect of BREEAM certifications on prime Central London office rents. Analysing data from more than 2,700 Central London office buildings, the study found a positive impact on rents for buildings rated as Very Good, Excellent, or Outstanding. The premiums ranged from 3.7% to 12.3%, with Outstanding BREEAM buildings commanding the highest rental increase.

Moreover, the research uncovered other significant factors affecting Central London office rents. Proximity to public transport, size and number of floors, green space nearby, building grade, and location within walking distance of a National Rail station were among the variables that positively impacted rents. This combination of attributes, location, and surrounding area, along with BREEAM ratings, illustrates a multifaceted approach to determining rental values.

Beyond the physical attributes and location, the growing emphasis on sustainability is also driven by top-level investor pressure, regulatory changes, risk mitigation, and a desire to align with global climate goals. The development of Net Zero Carbon Buildings in London showcases a tangible commitment to reducing carbon emissions. As part of this trend, London’s office space market is not only contributing to global environmental stewardship but also recognising the financial benefits of green-rated buildings.

Victoria Ormond, a Partner in Knight Frank’s Capital Markets Research team, stresses the novelty and significance of this research. She points out that while there’s a general understanding of the importance of ESG, quantifying how sustainability adds monetary value is a novel concept. For investors, landlords, and developers, understanding the impact of green ratings on income is crucial, especially since they can result in substantial rent premiums.

These findings are expected to have far-reaching implications for the London investment market. Investors seeking to differentiate their buildings and align with occupiers’ values may benefit from a ‘green value premium.’ Such assets are likely to increase in liquidity and, conversely, ‘non-compliant’ buildings risk losing value quickly, becoming ‘stranded’ and obsolete.

FAQs and Related Questions on London Office Rent

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