London's office market has surpassed its international counterparts, with a decrease in the availability of new office space driving prices to unprecedented levels last year.
Prime rental growth in both the City of London and West End climbed by 11.6% and 9%, respectively, buoyed by a city-wide vacancy rate of just 6.6%, as reported by City AM.
"Commercial development is one of London's key growth drivers," stated Charles Begley, Chief Executive of the London Property Alliance."
He pointed out that "Low vacancy rates in new office buildings suggest that the wider trend towards office-first work policies has supported central London's economy at a time when national growth prospects are muted."
In a comparative study, London's office market outshone global destinations like New York, Paris, Berlin, and Hong Kong, as detailed in the latest Global Cities Survey by the London Property Alliance (LPA).
The scarcity of premier office spaces led to rents reaching new peaks over the past year. For instance, the top floor of 22 Bishopsgate, London’s tallest tower, was leased for an impressive £122 per sq ft to Banco Master in January, rendering the tower fully occupied.
This rate stands in stark contrast to the average City rent of £75 – £87.50 per sq ft for Grade A properties, as reported by office design company Oktra. At the close of 2023, the average Grade A rent was set at £68.59.
By comparison, New York's Manhattan submarket saw its vacancy rates continue to soar from 11% in 2019 to 23% in 2024.
Office vacancy rates in Hong Kong have more than doubled over the same period, reaching 16 per cent in 2024, while Berlin and Paris have fared better with rates of 10 per cent and seven per cent respectively.
In London, availability in newly constructed, sustainable office buildings has dwindled to a mere 0.5 per cent in the City, as reported by global property consultancy Knight Frank.
With a shortage of high-quality, eco-friendly spaces in London's most sought-after office districts, developers have been capitalising on demand by constructing a series of new buildings across the capital.
Currently, there are 10 skyscrapers under development in the City of London, including what will soon be London's tallest tower, 1 Undershaft.
However, it remains to be seen whether companies can fill these offices they're keen to occupy, given the ongoing tug-of-war between employers advocating for more in-office work – particularly banks – and employees resisting this shift.
