London office demand hits record high for third consecutive quarter

Demand for high-quality, environmentally-sustainable workspace is driving office letting activity in central London to record highs. Active searches for central London offices have hit a third consecutive quarterly high at 13m sq ft, according to a report by Cushman & Wakefield. The agency points to a combination of supply constraints and rising sustainability requirements as the drivers of the demand. Cushman’s analysis found that occupiers are willing to search for longer as they pursue grade-A spaces with strong sustainability credentials. Overall leasing activity was still a fifth lower than the average for the past decade, although grade-A activity nudged up slightly beyond that average. Grade-A workspaces accounted for 77% of leasing activity in Q2 – the highest proportion on record. However, there is a lack of sustainable grade-A space coming down the pipeline and the shortage of supply is expected to continue past 2025. The report said demand will only increase as minimum EPC requirements for commercial properties rise. Andy Tyler, head of London and South East office leasing at Cushman & Wakefield, said: “With the majority of occupiers focused on grade-A space, there is an increasing awareness that the availability of the best-in-class space is under increasing pressure.” He predicted this would “lead to a gradual decrease in vacancy rates” and fuel rental growth at the top end of the market. Echoing earlier analysis from Savills, the report also highlighted contrasting levels of activity between the West End and the City. Deal flow in the Square Mile was more than triple that of the West End, at 1.53m sq ft compared to 485,000 sq ft. Some 82% of the lettings made in the West End were for grade-A space, whereas the figure was 74% in the City. Check out London lettings information here >> Photo © Valentin Wolf/imageBROKER/Shutterstock