Supply starved 2025 will boost rents, says Savills

London agents are confident of rental growth and increased office take-up this year after 2024 ended with a strong set of figures. Fresh data from Savills shows that the number of office take-up transactions rose by 3% across the West End and the City last year, with the volume of office space taken nudging up by 1% to 10.1m sq ft. Take-up in the final three months of 2024 reached around 3.2m sq ft, up by 16% on the previous quarter but down by 5% on the long-term average. Office vacancy rates decreased by 70 basis points to 7.5% during Q4 2024, with supply at the year-end standing at 19.6m sq ft. Active demand from occupiers for space in the West End and City stood at 13.5m sq ft, up by 44% on the long-term average, with strong demand from the insurance and financial services sector. Demand data indicates that 48% of active occupiers are seeking to increase their space, said Savills, compared with 21% seeking to decrease space. Grade-A rents in the City nudged up by 2.8% to £70.51 per sq ft in 2024, according to Savills’ research, with prime City rents rising by 7.5% to £98.60 per sq ft. In the West End, average grade-A rents remained broadly stable at £94.87 per sq ft with average prime rents at £157.15 per sq ft. Josh Lamb, director in Savills’ City office agency team, said: “With increased costs and fewer options available across both the City and the West End, we are confident that 2025 will see further rental growth on the very best offices, while some occupiers will have to compromise either on the quality of the office stock they are seeking or consider non-core locations.” Hunter Booth, director in Savills’ West End office agency team, added that while take-up in the West End was down on the five-year average, he believed many of the reasons that stopped occupiers making final decisions about office moves would ease in 2025 and that there would be “increased impetus” to move driven by a low-supply environment. “This is borne out by West End demand being 9% up on the 10-year average,” said Booth. “In addition to this, 20% of West End development scheduled in 2025 is already prelet, with lower supply coming through in 2026/27, so occupiers will feel the pressure to transact on the space that remains available in this year’s pipeline. This should drive robust rental growth this year both for prime and grade-A space.”   Photo by Oliver Dixon/Shutterstock