Occupier requirements for London office space have hit the highest level for a decade, according to new figures from Knight Frank.
Companies are on the hunt for close to 12m sq ft of new office space in the capital – a 34% increase compared with last year – with 80% of these firms intending to upsize or match their office footprint in the UK capital. Forty of these requirements are for more than 50,000 sq ft.
Knight Frank’s figures also show London’s prime office rents are on an upward trajectory, with 25 leasing deals in the City of London completing at rents of £90/sq ft and above over the past two years, compared with just six in the preceding four years. The West End has seen 142 deals of more then £100/sq ft in the previous 24 months, compared with 112 in the four years prior.
The total office take-up for 2023 was 10.7m sq ft against a long-term average of 12m sq ft, with a flurry of deals completing in Q4. Knight Frank expects office take-up in 2024 to hit 12m sq ft, which would be 12% up on last year.
Activity will be fuelled by leases ending or reaching break clauses between now and 2026 across 28.3m sq ft of office space currently occupied in London.
Philip Hobley, head of London offices at Knight Frank, said: “London’s occupational market remains robust as the bifurcation in demand and transition to office-first work policies continue to crystalise. While vacancy rates have increased in older, secondary buildings, prime rents in best in class offices have continued to rise. The future pipeline cannot satisfy ongoing demand, even at current levels, which is something we haven’t witnessed in previous similar recovery cycles through macroeconomic turbulence. These structural trends should continue to support London’s recovery, particularly in the investment market, with stabilising interest rates making prime office yields more debt accretive.”
