- City and West End achieve prime rental growth of 11.6% and 9% respectively
- London boasts lowest office vacancy rate among key global city peers at 6.6%
- London ended 2024 with the highest volume of public transport journeys since the pandemic, with Tube ridership reaching 87%
London has outperformed global rivals New York, Paris, Berlin and Hong Kong across a range of metrics, according to the latest Global Cities Survey published by London Property Alliance (LPA).
Offices prove to be the biggest driver of the capital’s robust performance, with the City and West End leading the pack with prime rental growth of 11.6% and 9% respectively. London’s vacancy rate of 6.6% is its lowest post pandemic, following a peak of 8.8% in 2023. Availability in prime City and West End developments is at near record lows; 1.1% and 0.3% respectively, according to Knight Frank.
The fall in availability is in part due to a shortage of prime office stock, which has been exacerbated by a significant drop in major planning applications in central London over the past decade, as highlighted in LPA’s 2024 Good Growth in Central London report. This is in addition to an increase in demand from companies seeking to upgrade their corporate headquarters to support office-first workspace strategies.
The survey, produced in partnership with independent think tank Centre for London, shows how best-in-class space has also been fuelled by growing business sectors, with the capital’s technology industry forecast to expand by 3.2% – behind only New York (3.6%). This comes amidst the continued AI infrastructure capital and innovation race. Cloud technology firm Monday.com recently agreed to take 80,000 sq ft at Fitzrovia’s 1 Rathbone Square and AI media company Synthesia leased a new corporate headquarters at British Land’s Regent’s Place campus last month.
London’s already established financial services industry is set to witness a 0.5% expansion this year, which is behind New York (3.3%) and Hong Kong (1.1%), but continues to outpace Paris and Berlin, both of which face no growth. And, with insurer PIB Group currently under offer to lease new space at One Leadenhall, a new record for office rents in the City appears imminent.
In comparison, office vacancy rates in New York’s Manhattan submarket are continuing to steadily increase from 11% five years ago to 23%, where it has remained over the past year. Hong Kong’s office vacancy levels have also more than doubled over the same period, currently sitting at 16%, with Berlin (10%) and Paris (7%) faring better. Berlin and New York office markets have witnessed 0% prime rental growth since 2020, whereas Hong Kong’s has declined 7%. Paris on the other hand has increased by 8.3%.
Despite macroeconomic headwinds and geopolitical uncertainty, London’s economy is forecast to grow 1.9% in 2025 compared to 1.6% last year, and more than double the 0.8% growth expected for the UK as a whole. At the same time, London’s unemployment rate increased from 3.8% to 6.1% in the year to January 2025, behind only Berlin (9.7%) in our city sample.
London’s job vacancy rates witnessed two years of decline before stabilising at the end of 2024. The number of openings remains 25% below levels seen at the start of 2020. This places the UK capital at the lowest level within its global city peer group. Hong Kong (up 32%) and Paris (up 7%) are the only two cities currently reporting positive job vacancy growth compared with five years ago.
London ended 2024 with the highest volume of public transport journeys since the pandemic, which is a positive sign of recovery. Tube and bus ridership reached 87% and 86% of their pre-pandemic equivalent quarters at the end of 2024. However, growth appears to have flatlined in absolute terms. Notwithstanding this, London remains way ahead of the New York Subway (77%) and Hong Kong Rail (82%) in terms of its post-Covid recovery.
For the first time the bi-annual survey also includes construction starts, reflecting the policy climate in the UK, where infrastructure and housing are central to the Labour Government’s plans for growth. The sector is projected to reach a three-year high in output in 2025, behind only New York.
Charles Begley, Chief Executive, London Property Alliance added: “Commercial development is one of London’s key growth drivers, continuing to attract global businesses and talent despite wider macroeconomic and geopolitical challenges. Low vacancy rates in new office buildings suggest that the wider trend towards office-first work policies has supported central London’s economy at a time when national growth prospects are muted, and the diverse occupier base means that there is always appetite for best-in-class offices in the City and West End.
“Central London is a vital engine of the national economy, and unlocking its full potential requires a clearer and more pragmatic planning framework that can drive job creation, infrastructure upgrades and sustainable development. The ambitious London Growth Plan recognises this significance, and now the Government must pull all the levers at its disposal to reinforce the capital’s global status as the commercial hub of choice for businesses and investors.”
