City Property Association's City of London Market Update: Q&A with Dan Gaunt
More than 200 developers, investors and property professionals attended a City Property Association briefing on the London market, featuring a presentation from Dan Gaunt, Co-Head of London Office Leasing at Knight Frank, and a panel chaired by CPA chair Ross Sayers. Knight Frank followed up with Gaunt on the main points.
On investment, turnover is running 53.5% below the long-term annual average of £13.2bn, although volumes improved to £6.2bn in Q4. UK investors led with £2.5bn in the quarter, followed by North American buyers. Private capital remains the most active source, but institutional investors are returning, which Gaunt sees as a sign of renewed confidence in offices. Prime yields held steady at 3.75% in the West End and 5.25% in the City and Southbank.
The City leasing market is described as very healthy. Take-up in 2024 was 17% above the long-term average of 2.8 million sq ft, and around 71.3% of leasing was for new or refurbished space. Activity is strong in the 40,000 to 60,000 sq ft bracket, led by professional and financial services, and a recovery in technology demand could broaden it further. Notable Q4 deals included 10 Gresham Street and One Millennium Bridge, both refurbished or partly rebuilt schemes that secured strong rents.
Demand is more than 18% above the long-term average, while vacancy for new space in both the City Core and West End Core is under 1%, and under 4% including refurbished space. This shortage of Grade A offices is pushing rents up, with City Core prime rents rising from £90 to £95 per sq ft. The construction pipeline is growing, but Knight Frank's data suggests speculative delivery over the next four years will fall short of demand.
Gaunt's outlook is positive, with limited Grade A supply and continuing demand expected to drive growth in the City and West End over the next few years.
Source: Knight Frank Newcastle, original article (17 February 2025)
