Companies are renting bigger London offices, undoing Covid cuts
It is the first time vacancies have fallen since the first quarter of 2020 when the rate was 4.6 per cent, CoStar’s data show
[LONDON] Companies moving office in London last year leased more expansion space than they have done since 2019, just the year before the coronavirus pandemic upended white-collar working practices and sent shock waves through commercial real estate markets.
Across central London 70 per cent of the established businesses that moved office in 2024 took additional space, totalling about 4.1 million square feet of expansion, according to data compiled by broker Cushman & Wakefield. To be sure, some 88 did slash their space but overall the net expansion was still 3.27 million square feet, 75 per cent more than a year earlier, the broker’s data show.
The numbers reveal how companies’ attitudes towards their office footprints continue to evolve exactly five years on since a stark prediction by then Morgan Stanley chief executive officer James Gorman, who at the onset of the lockdowns in the US and Europe envisioned a future with “much less real estate”.
While that prophecy did come true in the initial aftermath of the pandemic when businesses began to slash space and move to smaller buildings, the opposite is appearing to be unfolding now as time has wound on.
“At first it was just less, then it was less but better,” said Ben Cullen, Cushman & Wakefield’s head of UK offices. “Now it is more and better.”
Last year, Morgan Stanley finally committed to maintaining its London footprint in Canary Wharf after several years of scouting alternative options. And some rivals such as HSBC Holdings, which did move to slash space, are now weighing whether they will actually have enough with staff once again spending most, if not all, of their time in the office.
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Jane Street has increased the size of its planned London office move while Deutsche Bank has ruled out vacating the space it occupies in Canary Wharf. JPMorgan Chase is also in talks to take expansion space in the east London financial district, Bloomberg News has reported.
“Some of the right sizing measures that we saw in the post-pandemic period are correcting,” Kiran Patel, head of London office research at Cushman & Wakefield said.
Still, the distribution of demand has shifted since the pandemic, with companies increasingly focused on the most central and best connected areas. That’s proved a boon for the City of London with its web of subway and mainline rail stations, with the area seeing a record 339 leases of over 5,000 square feet each signed in 2024, Cushman’s data show.
In total, the ancient financial district accounted for 64 per cent of the overall transaction volume, the most ever recorded.
At the same time, businesses that did move office stayed closer than ever before to their previous location, highlighting the extent to which companies have become reluctant to interfere with workers’ commutes as they attempt to lure them back more often.
That concentration of demand coupled with a dearth of new supply is expected to push up rents in the best connected areas, exacerbated by incoming property tax hikes that will see the overall cost of occupation in areas including the City rise sharply. That could finally give some relief to more peripheral markets such as Canary Wharf, which will become even cheaper by comparison, making them more attractive, Cullen added.
Overall office vacancy rates in the UK fell in the first quarter for the first time since the pandemic, data compiled by CoStar Group show. The national vacancy rate stood at 8.6 per cent in March, down from the 8.7 per cent recorded at the end of 2024, a 12-year high. It is the first time vacancies have fallen since the first quarter of 2020 when the rate was 4.6 per cent, CoStar’s data show. BLOOMBERG
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