Foreword
Momentum, polarisation, volatility: these three dynamics will converge to shape the London office market in 2025.
The interplay and interdependence of these three dynamics lie at the heart of the future performance of the London office market, and will determine the market’s speed and trajectory, the nature of its challenges, and London’s longer-term potential to sustain and enhance its global standing.
Momentum, polarisation, volatility: these three dynamics will converge to shape the London office market in 2025.
The interplay and interdependence of these three dynamics lie at the heart of the future performance of the London office market, and will determine the market’s speed and trajectory, the nature of its challenges, and London’s longer-term potential to sustain and enhance its global standing.
Momentum Builds: One Year On
One year since the inaugural publication of The London Series, momentum – a central theme of that campaign – continues to reshape the London office market. Active demand has grown, with take-up increasing each quarter in 2024, surpassing 3.3 million sq ft in Q4. On the supply side, total available office space has declined over the year, driven by increasing occupier engagement and efforts in refurbishment, repurposing, and repositioning.
Momentum is undoubtedly building, yet its distribution across the market remains uneven. Geographically, core markets have sustained a stronger cadence than non-core markets. Leasing markets have also outperformed investment markets. With the starkest example of a two-tiered market dynamic lying in the quality of office products.
Momentum Builds: One Year On
One year since the inaugural publication of The London Series, momentum – a central theme of that campaign – continues to reshape the London office market. Active demand has grown, with take-up increasing each quarter in 2024, surpassing 3 million sq ft in Q3 – the strongest third-quarter performance since 2019. On the supply side, total available office space has declined over the year, driven by increasing occupier engagement and efforts in refurbishment, repurposing, and repositioning.
Momentum is undoubtedly building, yet its distribution across the market remains uneven. Geographically, core markets have sustained a stronger cadence than non-core markets. Leasing markets have also outperformed investment markets. With the starkest example of a two-tiered market dynamic lying in the quality of office products.
Polarisation Deepens
Last year, we observed that structural changes in real estate markets generate polarisation. London has indeed become more divided regarding office quality and rental performance. Over the past year, there has been a marked divergence in occupier demand, leasing activity, and financial outcomes between new or fully refurbished offices and secondary stock. The investment market has also experienced polarisation, with distinct differences between active and inactive investors.
From Uncertainty to Volatility
The London office market has faced persistent uncertainty over the last decade, influenced by Brexit, political upheaval, elections, geopolitical tensions, conflicts, and Covid. This prolonged period has normalised uncertainty, leaving investors and occupiers to adapt or pause, hoping for a return to normality. However, the sustained nature of this uncertainty suggests a permanent shift away from past market norms.
Instead, volatility will become the defining characteristic of the macroeconomic and operating environment. While 2024 saw global elections impacting over half the world’s population, many political transitions have now been enacted or accepted. The new Labour government is navigating domestic economic health in the UK against a complex global economic backdrop. At the same time, in the US, Donald Trump’s return to the presidency will reignite the domestic agenda, reshape geopolitics, and trigger volatility through significant policy shifts. The precise policy mechanisms used on both sides of the pond and how they are received will invariably generate challenge, opportunity, upheaval, and volatility.
Delivering Clarity Through Insight, Nuance Through Data
Through four insight papers, The London Series 2025 examines the intersection between momentum, polarisation and volatility; providing a detailed analysis of the trajectory, positioning, and performance of the London market in 2025 and beyond.
Insight One: London: Leading in the Age of Volatility
London consistently ranks among the world’s leading cities, celebrated as a global hub for investment, business, culture, retail, tourism, education, and living. Its position may seem secure – so why re-evaluate London’s case now? Because 2024 has been a year of profound domestic, global, financial, and political change.
Insight One highlights London as both a beacon of relative stability in uncertain and volatile times and a pioneer of technological innovation, modernisation, and economic growth. These strengths, combined with its enduring competitive advantages, present a compelling opportunity for investors, developers, and occupiers. As the paper explores, this is the moment to engage, at the start of the next chapter in London’s evolution.
Insight Two: Unlocking London: Shifting Behaviours, Emerging Opportunities
Market behaviour and performance are always shaped by the interplay between supply and demand. The post-Covid period has seen the London leasing market diverge from traditional norms, driven by profound structural changes and broader economic uncertainty, with an associated recalibration of market metrics.
Insight Two focuses on the market implications of these shifting behaviours, their impact on rents and key considerations for 2025 and beyond. The paper observes that while recognising wider economic and operating market volatility, conjecture is giving way to conviction on the demand side. But with that conviction comes greater variability in response. And that’s a good thing, as it is this variety of behaviours that will be essential in unlocking the London office market.
Insight Three: The Core Opportunity
The investment market remains challenged, but signs of stabilising investor sentiment and emerging activity suggest a revival in volumes for 2025. Advanced economies are beginning to reduce policy rates, and while long-term financing costs have risen following the UK Budget and US election, interest rates are expected to decline over the medium to long term.
Insight Three presents the investment case for lower-risk profile assets. With values down nearly 30% from their peak and with leasing market and rental growth expectations improving, these assets now present an attractive case for investment. A well-functioning market requires increased institutional investment in larger lot-size assets, and institutional investors are steadily returning, with the availability of core assets for sale growing.
Insight Four: London as a Mega City
London is on the brink of a transformation. In less than a decade, it will officially become a mega city. This is a huge milestone but also a challenge. London’s future requires growth, while maintaining cohesion and functionality, a matter central to the UK’s productivity and prosperity. A UK Foundations report highlights three critical enablers: housing, infrastructure, and energy supply. The report suggests that London’s and the UK’s future growth depends on private investment, economic clustering, and increased power leading to reduced energy costs.
To thrive, London must grow further, anchored by these pillars, and reimagine itself as a modern megacity appealing to global investors, businesses, and talent. This transformation requires a fundamental rethinking of how Londoners live, work, and interact with their city. The final part of The London Series explores the real estate challenges and opportunities ahead, offering a strategic vision for London’s future.
To find out more about the London office market and our upcoming series, click the button above.
Polarisation Deepens
Last year, we observed that structural changes in real estate markets generate polarisation. London has indeed become more divided regarding office quality and rental performance. Over the past year, there has been a marked divergence in occupier demand, leasing activity, and financial outcomes between new or fully refurbished offices and secondary stock. The investment market has also experienced polarisation, with distinct differences between active and inactive investors.
From Uncertainty to Volatility
The London office market has faced persistent uncertainty over the last decade, influenced by Brexit, political upheaval, elections, geopolitical tensions, conflicts, and Covid. This prolonged period has normalised uncertainty, leaving investors and occupiers to adapt or pause, hoping for a return to normality. However, the sustained nature of this uncertainty suggests a permanent shift away from past market norms.
Instead, volatility will become the defining characteristic of the macroeconomic and operating environment. While 2024 saw global elections impacting over half the world’s population, many political transitions have now been enacted or accepted. The new Labour government is navigating domestic economic health in the UK against a complex global economic backdrop. At the same time, in the US, Donald Trump’s return to the presidency will reignite the domestic agenda, reshape geopolitics, and trigger volatility through significant policy shifts. The precise policy mechanisms used on both sides of the pond and how they are received will invariably generate challenge, opportunity, upheaval, and volatility.
Delivering Clarity Through Insight, Nuance Through Data
Through four insight papers, The London Series 2025 examines the intersection between momentum, polarisation and volatility; providing a detailed analysis of the trajectory, positioning, and performance of the London market in 2025 and beyond.
Insight One: London: Leading in the Age of Volatility
London consistently ranks among the world’s leading cities, celebrated as a global hub for investment, business, culture, retail, tourism, education, and living. Its position may seem secure – so why re-evaluate London’s case now? Because 2024 has been a year of profound domestic, global, financial, and political change.
Insight One highlights London as both a beacon of relative stability in uncertain and volatile times and a pioneer of technological innovation, modernisation, and economic growth. These strengths, combined with its enduring competitive advantages, present a compelling opportunity for investors, developers, and occupiers. As the paper explores, this is the moment to engage, at the start of the next chapter in London’s evolution.
Insight Two: Unlocking London: Shifting Behaviours, Emerging Opportunities
Market behaviour and performance are always shaped by the interplay between supply and demand. The post-Covid period has seen the London leasing market diverge from traditional norms, driven by profound structural changes and broader economic uncertainty, with an associated recalibration of market metrics.
Insight Two focuses on the market implications of these shifting behaviours, their impact on rents and key considerations for 2025 and beyond. The paper observes that while recognising wider economic and operating market volatility, conjecture is giving way to conviction on the demand side. But with that conviction comes greater variability in response. And that’s a good thing, as it is this variety of behaviours that will be essential in unlocking the London office market.
Insight Three: The Core Opportunity
The investment market remains challenged, but signs of stabilising investor sentiment and emerging activity suggest a revival in volumes for 2025. Advanced economies are beginning to reduce policy rates, and while long-term financing costs have risen following the UK Budget and US election, interest rates are expected to decline over the medium to long term.
Insight Three presents the investment case for lower-risk profile assets. With values down nearly 30% from their peak and with leasing market and rental growth expectations improving, these assets now present an attractive case for investment. A well-functioning market requires increased institutional investment in larger lot-size assets, and institutional investors are steadily returning, with the availability of core assets for sale growing.
Insight Four: London as a Mega City
London is on the brink of a transformation. In less than a decade, it will officially become a mega city. This is a huge milestone but also a challenge. London’s future requires growth, while maintaining cohesion and functionality, a matter central to the UK’s productivity and prosperity. A UK Foundations report highlights three critical enablers: housing, infrastructure, and energy supply. The report suggests that London’s and the UK’s future growth depends on private investment, economic clustering, and increased power leading to reduced energy costs.
To thrive, London must grow further, anchored by these pillars, and reimagine itself as a modern megacity appealing to global investors, businesses, and talent. This transformation requires a fundamental rethinking of how Londoners live, work, and interact with their city. The final part of The London Series explores the real estate challenges and opportunities ahead, offering a strategic vision for London’s future.
To find out more about the London office market and our upcoming series, click the button above.