​Office space demand dipped significantly in London (and in general) during and post-pandemic, predominantly due to the increase of work from home culture. However, the London office market is demonstrating strong signs of recovery, with declining vacancy rates and strong demand for high-quality spaces. Both occupier and investor activity surged in the third quarter of 2024, reflecting renewed confidence in the capital’s commercial real estate sector. Despite challenges posed by elevated supply levels, the market’s recovery trajectory points to a potential upswing in rents and investment activity heading into 2025, driven by stabilising vacancy rates and continued demand for Grade A office space.

Central London’s vacancy rates dropped to 6.9% in Q3 of 2024, the lowest point in a year, as reported by Avison Young. Office take-up across Central London totalled 3.2 million square feet, a 44 percent quarterly increase in the City and an impressive 87% above the 10-year average in the West End.

According to global property consultancy Knight Frank, availability in newly constructed office buildings has fallen to 0.3 per cent in the West End Core – which includes Mayfair and St James’s – and 0.5 per cent in the City of London. This equates to just 379,394 sq ft of office space in two of London’s largest submarkets – less than eight months of average take up for new office space.

In comparison, vacancy rates across all London office stock currently stands at nine per cent, with a majority of this being space in average to lower quality buildings.

Regarding investment, confidence in the London office market also showed signs of improvement, with European and Asian investors leading the charge. Avison Young reported £482.2 million in office deals from European investors and £35 million from Asian buyers, underlining confidence in London’s recovery. However, overall trading volumes remain historically low, with expectations for a more active 2025 as interest rates ease and tenant demand strengthens.

With 2025 just around the corner, and nearly half of the 15.9 million square feet of the new office space being constructed in the capital already pre-let, the future looks considerably brighter for the sector.

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Sources: Workplace Insight, CityAM