London office rents hit record highs as companies jostle for green workspace

A post-pandemic dash for eco-friendly workplaces has pushed rents for the best offices in central London to record highs, according to new data. Prime office rents in both the West End and the Square Mile have risen to £117.50 per sq ft and £75 per sq ft respectively, as occupiers jostle for space that meets their sustainability criteria, said researchers at Knight Frank. That reflects an average rise of around £2.50 per sq ft between the second and third quarters of the year in each area, while take-up of central London office space leapt by 55% over the same period. Some 2.63m sq ft was leased in more than 220 deals, as companies returned to the leasing market with “a much clearer sense of their office requirements and workplace strategies”, according to the agency’s co-chair of London offices, Philip Hobley. “The London office market is increasingly competitive, as occupiers increasingly find themselves in competition for best-in-class space that performs strongly on sustainability grounds, supporting corporate goals, and offers wellness and amenity-rich space to support their employees,” he said. The amount of office space available to rent fell marginally over the quarter, and stands at 18.71m sq ft, meaning that 7.7% of office space across the capital sits vacant. The largest fall in availability was in the City Core, where the vacancy rate fell from 9.3% to 8.4%. Leasing activity in the quarter was driven by the professional services sector, which made up 21%, or 552,000 sq ft, of all new leases. Next was the tech sector, which made up 19%, or 500,000 sq ft. Flexible office providers also returned to the market, making up 8%, or 210,000 sq ft, of all new deals in the third quarter. The increase in leasing activity is set to continue into the final months of this year and the opening months of 2022, researchers continued. Live requirements for office space in London’s key office submarkets rose last quarter – by 12% in the City Core to more than 5,200,000 sq ft, and by 15% to 1,313,000 sq ft in the West End. Shabab Qadar, London research partner at Knight Frank, said: “As well as continued strong demand for the highest-quality new-build office space, there has been a notable uptick in take-up of second-hand space, indicating a more balanced recovery across the market than we have seen since the start of the pandemic. “It is also telling that London’s traditionally strongest sectors of professional services and financial services once again make up the majority of active requirements for new space, after a period in which the tech sector has been the biggest driver of demand.” To send feedback, e-mail alex.daniel@eg.co.uk or tweet @alexmdaniel or @EGPropertyNews Photo © Valentin Wolf/imageBROKER/Shutterstock