Central London’s office market outperforms New York and Hong Kong

London’s office market has outperformed global peers after a fall in availability of new stock pushed prices to record highs last year.

The City of London and the West End achieved prime rental growth of 11.6 per cent and 9 per cent last year, respectively, helped by a city-wide vacancy rate of 6.6 per cent.

“Commercial development is one of London’s key growth drivers,” Chief executive of London Property Alliance Charles Begley said.

“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.”

London’s office market outperformed global rivals New York, Paris, Berlin and Hong Kong, according to the latest Global Cities Survey published by London Property Alliance (LPA).

Low availability of best-in-class office space pushed rents to new heights last year.

The top floor of London’s tallest tower, 22 Bishopsgate, was let for £122 per sq ft to Brazilian bank Banco Master in January. The let took the tower to full capacity.

That compares to an average rent per sq ft in the City of £75 – £87.50 for Grade A spaces, according to office design firm Oktra.

The average Grade A rent at the end of 2023 was £68.59.

In comparison, vacancy rates in New York’s Manhattan submarket have continued to increase from 11 per cent in 2019 to 23 per cent in 2024.

Hong Kong’s office vacancy levels have also more than doubled over the same period, sitting at 16 per cent in 2024, with Berlin and Paris faring better at 10 per cent and seven per cent respectively.

London’s new skyscraper offices

Availability in newly constructed, sustainable office buildings has fallen to 0.5 per cent in the City of London, according to global property consultancy Knight Frank.

With low supply of high-quality, sustainable space in London’s most-desired office districts, developers have been busy taking advantage of demand to build a spate of new buildings across the capital.

There are 10 skyscrapers currently in development in the City of London, including soon-to-be London’s tallest tower, 1 Undershaft.

The question is whether companies will be able to fill the offices they are eager to occupy: there has been a significant push for the more in-office working by bosses – particularly banks – alongside a significant pushback against in-office working by employees.

But with tube and bus ridership at 87 per cent and 86 per cent of their pre-pandemic figures, respectively, by the end of 2024, the signs look good for London’s offices.