Q4 2023 Central London Office Market Report

Report on leasing and investment activity for the central London office market in Q4 2023

January 24, 2024
  • Chris Valentine
  • Julian Sandbach
  • Elaine Rossall
  • Hayley Mooney

This report provides comprehensive insights into the Central London commercial real estate markets, featuring critical data points across occupier take-up, demand, supply, rentals, and investment dynamics.

Key highlights include the rebound in leasing activity in the final quarter of 2023 with 3.4 million sq ft transacted - marking the highest quarterly numbers since Q3 2019, and the strongest Q4 volumes since 2010. Despite a strong end to the year, annual leasing volumes trailed behind 2022 figures, with 9.7 million sq ft compared to 10.1m sq ft. Notably, pre-letting activity emerged strong, with just under 2.4 million sq ft pre-let throughout 2023.

The banking and finance sector was leading the Q4 activity accounting for 41% of volumes, largely due to two large pre-let transactions by HSBC and Millennium Capital. Total space under offer declined on account of vigorous leasing volumes, with a total of 2.3 million sq ft under offer at year-end.

Occupier demand remained robust, with a significant 12.2 million sq ft of active requirements in the Central London market - a 33% increase on the long-term average.

Supply considerations revealed a decrease of 5% due to higher leasing volumes and slow speculative completions, with the total supply standing at 23.1 million sq ft at the end of Q4. Boosted by strong leasing activity, new and refurbished supply also decreased.

Rental rates across Central London saw an uptick during Q4, with prime West End rent increasing to £140.00 per sq ft, reflecting a 7.7% annual rise. In contrast, prime City rents ended at £79.50 per sq ft, signifying an annual growth of 9.7%.

Investment volumes in Central London increased by 28% quarter-on-quarter, totalling £1.59 billion in Q4, 34% above the prior year. The full year witnessed trade volumes of £6.5 billion, with overseas investors, notably from Asia Pacific, accounting for nearly three-quarters of the annual total. Prime yields in the City expanded by 50 basis points but remained unchanged in the West End at 4.00%.

Download the full Central London Office Market Report for Q4 2023 here.

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