142
WEST END
OCCUPIERS
Heena Gadhavi
Head of London Offices Research
Daryl Perry
Head of Research & Insight, UK and Ireland
Ben Cullen
Head of Offices, UK
Alistair Brown
Head of Lease Transactions
& Advisory, UK
Andy Tyler
Head of London Office Leasing
James Meikle
Head of London Occupier Representation
Martin Lay
Head of London Office Capital Markets
back to the Core
Locations driving rental prospects
NEW ENTRANTS
MARKET MOVERS
MARKET MAKERS
245
CITY OCCUPIERS
13
EAST LONDON
OCCUPIERS
The profile of occupiers across Central London remains varied, and as such, landlords, developers and investors should remain optimistic about the letting prospects of buildings. In 2023,
there were 31 transactions conducted by Flexible Workspace operators, equating to 867,000 sq ft, the highest number
and total square footage in a year in the post-Covid era.
There has been a clear acceleration in activity from education and medical providers, where 388,000 sq ft was leased across 16 transactions. Excluding these sectors and the 17 confidential occupiers, 422 transactions were by established Central London occupiers and 59 deals were done by new businesses or those entering the market from outside Central London. This was
down on the 537 deals recorded in 2022 but aligned with volumes seen in 2018.
Of the established companies, 80 opted to expand on their current footprint by acquiring additional office space in addition to existing holdings within Central London, equating to 1.46 million sq ft of take-up.
With many occupiers re-evaluating their real estate holdings, both in London and globally, the number of deals within this category reduced markedly in 2023, when compared to 2022 where an all-time high of 137 occupiers was recorded. The remaining 342 occupiers relocated across the market.
The profile of occupiers across Central London remains varied, and as such, landlords, developers and investors should remain optimistic about the letting prospects of buildings. In 2023, there were 31 transactions conducted by Flexible Workspace operators, equating to 867,000 sq ft, the highest number and total square footage in a year in the post-Covid era.
There has been a clear acceleration in activity from education and medical providers, where 388,000 sq ft was leased across 16 transactions. Excluding these sectors and the 17 confidential occupiers, 422 transactions were by established Central London occupiers and 59 deals were done by new businesses or those entering the market from outside Central London. This was
down on the 537 deals recorded in 2022 but aligned with
volumes seen in 2018.
The number of new entrants, which consists of both new occupiers and those who have relocated from outside Central London into the market, equalled 2021’s figures with 59 occupiers entering Central London.
This equated to 578,000 sq ft of additional demand into the market, all of which were for units of under 50,000 sq ft. Of the 59 occupiers, 31 moved into Central London from elsewhere in the UK equating to 345,600 sq ft, including 13 who relocated from within Greater London.
The West End was the main target for new market entrants, with 31 businesses leasing space in 2023 totalling close to 300,000 sq ft. In the City, 26 businesses entered the market, contributing 250,000 sq ft to annual take-up. The remaining 2 new market entrants leased office space in East London.
The City Core and Southbank submarkets attracted the highest number of new entrants, at 8 a piece and totalling 65,000 sq ft and 80,600 sq ft respectively. Whilst the City Core has always been the most active submarket for new entrants, both the number and volume of space leased in 2023 is below the long-term average of 11 and 90,000 sq ft.
In the Southbank, general market activity has been robust over the last 10 years, and the volumes for 2023 reaffirmed this area’s attractiveness. The 8 new market entrants is the highest on record, surpassing the previous high of 5 new entrants recorded in 2017. Clerkenwell was also a popular choice, with 6 new market entrants leasing a total of 80,000 sq ft, including the largest of the year – Pentland Brands leasing over 40,000 sq ft in The Johnson Building, relocating from their long-term owned premise in North London.
In the West End, Bloomsbury and King’s Cross were the most active submarkets, each recording five new entrants last year and totalling 37,000 sq ft and 54,000 sq ft respectively. The top four sectors for new entrants is unchanged since 2021, although the ordering has varied. Technology businesses were the most acquisitive, with 17 new entrants in 2023, increasing year-on-year for the last four years to its highest level since our records began.
Retail & Leisure occupiers followed, with 13 new entrants recorded, and then Manufacturing & Energy occupiers, which incorporates the Life Sciences sector, where strong and consistent figures have been recorded since 2021.
During 2023, there were 342 occupiers who relocated within Central London. This surpassed the 338 occupier relocations recorded in 2022, and is the largest number since 2015. This equated to 6.25 million sq ft, a 64% share of total take-up for the year. 172 businesses moved into a new submarket (relocator), whilst the remaining 170 acquired new space within the submarket of their previous location (stayer).
As per the last 11 years, the largest volume of movers went into the City Core (130) – 39 were relocators and 91 were stayers. This was the second largest volume of in-movers into the City Core behind 2015, when 140 moves were recorded. To put into further perspective, 2023’s volume was over a third more than 2022 when 95 movers were recorded, of which 68 were stayers.
Activity in Shoreditch has accelerated since 2020, with 24 relocations taking place in 2023, up from 9, 10 and 17 movers recorded between 2020 and 2022. Just 9 businesses moved within the submarket, with the remainder moving from other submarkets across Central London. Comparing these trends to those recorded since 2013, there is evidence to demonstrate how
this location has evolved and matured over the last 10 years.
A similar story is evident in Southbank, where the 22 movers in 2023 is the joint highest on record with 2022, 10 of which were stayers. The data also shows that movers into Southbank came from 8 other submarkets, demonstrating its increasing attractiveness as a location. The number of stayers as a proportion of all movers has remained high, typically between 45-55% since 2019, compared with proportions of 30% recorded in the prior years.
In the West End, relocations into Mayfair, Covent Garden, St James’s and Victoria led activity. In total, there were 62 deals in these submarkets, led by specific new developments including 31 St James’s Square, SW1 (3 relocation deals), 65 Davies Street, W1 (4 relocation deals), Grainhouse, WC2 (2 relocation deals) and N2, SW1 (2 relocation deals), among others.
In the core locations of Mayfair and St James’s, there have always been a high proportion of stayers, particularly within the Banking & Finance sectors, and the snapshot for 2023 is no different. Furthermore, only a handful of City-based occupiers relocate into Mayfair and St James’s in any one year – in 2023 there were only 2 relocations from the City, with all other movers coming from elsewhere in the West End.
WHERE ARE THEY MOVING?
Transactions at the larger end of the market have very much been focused on grade A stock in recently completed or speculative developments. In 2023, of all the transactions over 50,000 sq ft, all except 1 was for grade A space. There were 21 movers in this size range, 6 of which were relocators, moving further afield in order to secure suitable offices.
This includes HSBC and Bank of New York Mellon, both of whom will be leaving Canary Wharf for the City Core, and Virgin Media O2 who are consolidating into Paddington from offices in Hammersmith and Slough. These 3 transactions were all examples of occupiers committing to reduce their overall office take. Furthermore, Paul Weiss exited from the City Core into Soho, and Teneo moved from Southbank into the City Core – both
committing to more space than they previously leased.
In East London, 11 occupiers relocated in the market. 10 of these relocation deals were signed in Canary Wharf, of which 7 were stayers. The remaining 3 moved from the City market (2 from City Core and 1 from Midtown), with no West End movers into the market.
The average relocation distance by market movers, both those who relocated within and outside of their former submarket, was 0.86 miles in 2023, in line with figures recorded in 2022. This was also aligned with the five-year average of 0.87 miles, but below the pre-pandemic five-year average of 0.98 miles. Government & Public Sector businesses, Media and Retail & Leisure sectors remained the most footloose, travelling an average of 1.24 miles, 1.31 miles and 1.36 miles respectively last year.
The average relocation distance for occupiers moving into a West End submarket remains above those relocating in the City, as it has been since 2018, at 0.93 miles and 0.80 miles respectively.
In 2023, Professional Services businesses recorded the largest year-on-year increase of 32% to 0.89 miles, while the Insurance sector were the least footloose, remaining very close to their prior offices by moving just 0.17 miles in 2023, an increase of 41% on 2022 but in line with the distance recorded in 2017 and 2019.
NEW ENTRANTS
MARKET MOVERS
MARKET MAKERS
While the number of expanding occupiers remained robust, the volume of contracting businesses was also high. A total of 91 occupiers reduced their office space in 2023, equating to a loss of 1.77 million sq ft across the market. This was slightly behind the all-time high of 95 occupiers and 2.08 million sq ft recorded in 2022. The largest volume of consolidators relocated into the City market (63), with the City Core seeing 43 deals and a loss of 1.26 million sq ft recorded.
In the West End, where 24 businesses contracted, 7 occupiers moving into Mayfair reduced their space take, albeit this equated to just 38,000 sq ft. In Victoria however, 3 occupiers contracted by a total of 120,000 sq ft, driven in large by retailer John Lewis relocating from within the submarket. City Core and Victoria aside, all other submarket losses were below 100,000 sq ft.
The Professional Services sector saw 26 businesses reduce their Central London footprint, 18 of which relocated into the City market while 6 moved to the West End and 2 to East London. All contraction deals in this sector were for units of space below 25,000 sq ft, with a total net loss of 225,000 sq ft throughout the year.
Despite fewer businesses contracting in the Banking & Finance sector, 21 overall, the sector recorded the largest net loss of space of 973,000 sq ft. This was driven largely by HSBC’s commitment to relocate out of their long-term home in Canary Wharf to the City Core, reducing their space take by over 700,000 sq ft. In another significant contraction move, The Bank of New York Mellon saw their footprint in Central London reduce by c.70,000 sq ft upon relocation to their new offices in the City Core.
Of the 91 contractions, 77 were in the 5,000-25,000 sq ft range equating to a loss of 576,000 sq ft. This makes up 85% of the contraction market in 2023, in terms of the number of occupiers, and 33% of the whole market net loss recorded. However, taking expansions into consideration, overall this part of the market was in growth mode, with overall net expansion of 1.32 million sq ft recorded during the year.
Where the figures really shifted was in the larger end of the market. Of the 7 deals over 100,000 sq ft, 5 expanded by 593,000 sq ft while 2 contracted by close to 800,000 sq ft – this equated to an overall net loss of 204,000 sq ft across Central London.
The Contractors
Across the Central London office market, more occupiers expanded than contracted in 2023, taking total net expansion for the year to +1.86 million sq ft. Whilst this was 24% below the recorded net expansion of +2.45 million sq ft in 2022, an overall expansionary market points to continued strength and demand for London office space.
During the course of 2023, 326 existing Central London occupiers added to their office footprint. This included both business who acquired an additional office space or those that relocated and acquired more space than their previous office. All in all, this accounted for take-up of 5.67 million sq ft, and total expansion of 3.63 million sq ft, for the year. In terms of number of businesses, this was the second highest on record after 2022, although total net expansion ranked seventh over the last 11 years.
Key examples include Kirkland & Ellis taking their option space of 194,000 sq ft at 40 Leadenhall, taking their total space take in the building to almost 500,000 sq ft. Additionally, Millennium Capital, who have already relocated to a nearby and smaller office in the West End on a short term lease, pre-let 176,000 sq ft in 2023 for their planned moved into their new office upon completion of refurbishment works.
Furthermore, TikTok continues their London office expansion, opening a second office in Central London (139,000 sq ft at Verdant in Clerkenwell), adding to their existing footprint of 86,000 sq ft at Kaleidoscope in the same submarket. The largest number of expansions took place in the City market, with 201 occupiers expanding by 2.34 million sq ft, compared with 114 businesses and 1.23 million sq ft in the West End and 11 occupiers and 123,000 sq ft in East London.
Following trends from 2022, the Professional Services sector remained the most active sector for expansions in 2023, with 87 businesses taking additional space across London – 60 in the City, 24 in the West End and 3 in the City – with total expansion of 625,000 sq ft. The Banking & Finance sector followed, as it did in 2022, with 74 businesses expanding by a total of 1.09 million sq ft.
Small to medium sized businesses continued to show the most likelihood of expansion. The 275 businesses occupying less than 25,000 sq ft collectively recorded a total expansion of 1.89 million sq ft, outstripping total expansion in the 25,000 sq ft+ market where 53 businesses increased their space take by 1.80 million sq ft. However, the middle market, comprising deals in the 25,000-75,000 sq ft size range, bounced back somewhat in 2023, with a total expansion of 1.03 million sq ft by 44 occupiers, up by 11% and 16% respectively.
There is the perception that vacancy rates in Central London are high – and this is true when looking at the market as a whole against historic periods. As at the end of 2023, the vacancy rate in Central London was 9.3%, the highest level in almost 20 years, compared with 4.9% at the end of 2019. However, demand for grade A space remains the most sought after, and vacancy rates for this part of the market – although high in a historical context – sit at 4.8%. Breaking this down by submarket, and overlaying with in-movers, show the true nuances between the various locations, which dictate migration patterns.
Comparing vacancy at the end of 2023 and looking at the locations where there has been the highest increase, non-core locations come out on top. With occupiers wanting to move to more central locations, the non-core locations are the ones that have been affected, with high availability and low migration recorded.
Focussing on core locations, in Mayfair & St James’s, the current lack of availability and low vacancy rates of 2.3% and 1.5% resulted in fewer businesses entering the market then leaving, with net migration of -11 and -5 recorded respectively.
The same is true for areas which border these submarkets, like North of Oxford Street, Soho and Fitzrovia, all of which recorded low levels of in-movers, negative net migration and have relatively low vacancy rates.
The City Core has maintained low vacancy rates of 4.4%, recording 129 in-movers and net migration of +19 occupiers in 2023, demonstrating its desirability as a location. Leasing activity last year was extremely strong, driven by high levels of development activity during the year.
Despite varied occupier activity, Mayfair and St James’s and the City Core are also the main submarkets which have driven rental growth since 2020, with a clear acceleration noted over the last 18 months. Certain submarkets also continue to benefit from the opening of the Elizabeth Line in 2022. This was clear in locations surrounding Liverpool Street and Farringdon almost straight away, however over the last 12-months, activity around Tottenham Court Road and Bond Street has also begun to increase, driven in part by development completions over the last 12 months, as well as rental prospects.
An evolution of occupier requirements is driving an ever-increasing focus on quality of buildings in core locations – with these buildings letting well both in terms of velocity and rental levels. For investors looking for core income, these assets are the most sought after and when do they become available, there are often multiple competitive bids.
In an uncertain and difficult investor climate, the strong occupational fundamentals for Central London offices is key. Robust leasing activity in 2023, particularly for grade A space, stabilising levels of vacancy, high levels of active requirements and a tightening development pipeline are all driving upward pressure on further rental growth.
Rental growth is particularly prevalent at the top end of the market. Over the last four years, the number of deals in the City Core with a blended rent over prime at the time of letting has more than doubled – from 20 in 2020 to 49 deals in 2023 – while in Mayfair & St James’s, where rents start at a higher base, the number of deals has tripled since 2020 and maintained consistency over the last two years.
This divergence between prime and super-prime is likely to continue as we enter into a period of subdued development activity in core locations. The value-add opportunities in these submarkets are currently, and likely to remain, the most sought-after and traded stock, when supply does become available.
As debt markets begin to stabilise at a lower cost over the next six to nine months, and inflation comes down closer to the 2% target, income opportunities across Central London’s office market will become increasingly popular, and may trigger more development starts earmarked for beyond 2025, where there is an absence of new development in the current pipeline.
14
RELOCATORS
FROM THE CITY
31
New
entrants
RELOCATORS
FROM EAST LONDON
0
MOVERS
FROM WITHIN THE WEST END
97
3
RELOCATORS
FROM EAST LONDON
26
New
entrants
170
MOVERS
FROM WITHIN THE CITY
46
RELOCATORS
FROM THE WEST END
1
RELOCATORS
FROM THE WEST END
3
RELOCATORS
FROM THE CITY
7
MOVERS
FROM EAST LONDON
2
New
entrants
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Overview
Active Occupiers
Future Investment Areas of Growth
2023 Migration Patterns
Overview
Active Occupiers
Future Investment Areas of Growth
2023 Migration Patterns
Overview
Active Occupiers
Future Investment Areas of Growth
2023 Migration Patterns
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The Expanders
Get in touch to discuss this analysis in detail with our expert C&W team.
Overview
Active Occupiers
Future Investment Hotspots
2023 Migration Patterns
GLOSSARY
Established companies: comprises all occupiers that already have an office in Central Londo
Mover: an office move in/out of a submarket within Central London
Stayer: an office move within the same Central London submarket as the previous office
Relocator: an office move into a new Central London submarket
Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
GLOSSARY
Established companies: comprises all occupiers that already have an office in Central Londo
Mover: an office move in/out of a submarket within Central London
Stayer: an office move within the same Central London submarket as the previous office
Relocator: an office move into a new Central London submarket
Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
OCCUPIERS
17 OCCUPIERS REMAIN CONFIDENTIAL (EXCLUDED FROM ANALYSIS)
WEST END
191 IN THE WEST END
CITY & EAST LONDON
331 IN THE CITY, 23 IN EAST LONDON
TRANSACTIONS
545 transactions over 5,000 sq ft in 2023, equating to 9.62 million sq ft
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HOW FAR ARE THEY MOVING?
The Professional Services sector was once again the most active in 2023, with 96 moves recorded throughout the year totalling 1.24 million sq ft. This was below the 102 moves and 1.37 million sq ft recorded in 2022. A large proportion of these moves took place in the City market (66), of which half were in the City Core. Stayers in the City remained commonplace – 28 in the City, compared with 7 in the West End and 3 in East London. Intercontinental Exchange Inc (ICE), who leased over 125,000 sq ft in the City Core, were the only large scale market mover in this sector in 2023, relocating from another City Core building and expanding on their former office space by over 50,000 sq ft. All other Professional Services market movers leased space under 50,000 sq ft.
Banking & Finance occupiers were also active, with the 71 recorded relocations in 2023 the highest numbers since 2019, equating to 2.04 million sq ft. Unlike some of the other sectors where there is a clear favoured market, Banking & Finance occupiers remain open to relocating in both the City and the West End, with 34 a piece recorded in 2023, and the remaining 3 businesses moving to East London. Within this sector, there were three relocation deals over 100,000 sq ft, the largest of which was HSBC’s planned moved from Canary Wharf to Panorama St Pauls.
This deal was also the largest contraction recorded during the year, with HSBC leaving 1.2 million sq ft for 480,000 sq ft – a reduction of almost 720,000 sq ft. The other two deals in this size bracket – Millennium Capital’s planned move from within Mayfair for 176,000 sq ft and Pimco’s future relocation within the North of Oxford Street submarkets – were also significant, with both occupiers expanding on their former office space.
The Technology sector has rebounded strongly when looking at deal numbers, with 61 relocations recorded in 2023. However, the quantum of space leased remains subdued at 760,000 sq ft, compared with the pre-covid average for relocations of over 1 million sq ft. The City remained the favoured market, with 44 businesses moving here, of which 24 relocated within their existing submarket. Capgemini were the largest recorded mover, relocating from within the City Core and expanding their office space by over 20,000 sq ft.
Another notable sector where activity has increased is Retail & Leisure. In 2023, there were 24 relocation deals – 13 in the West End, 10 in the City and 1 in East London – the largest number since 2018 and equating to over 500,000 sq ft, which is the largest on record. This was driven by three significant retailer relocations – John Lewis relocating within Victoria where they have reduced their office space by c.84,000 sq ft; Chanel’s pre-let of 86,000 sq ft within Mayfair; and Sainsbury’s leaving their long-term home in Midtown for grade A space
in Clerkenwell.
Who is moving?
The number of deals in 2023 (545) remained high, albeit 9% lower than the volume recorded in 2022 which was a record high. As with 2022, this was driven by a high volume of 5,000-25,000 sq ft deals (438), although this was a reduction of 11% on the prior year. There were seven deals over 100,000 sq ft to complete in 2023, which is the lowest number outside of 2020 where just four were recorded.
There were 59 new Central London occupiers taking space across the market, in line with 2021 but marginally lower than the 2022 when 62 new entrants were recorded. Of this number, 28 occupiers were new businesses acquiring their first office space, while the remaining 31 occupiers relocated from outside of Central London.
In 2023, of the new market entrants and those who relocated in Central London, 245 deals were signed in the City market – the highest since our records began. In the West End, 142 deals were signed.
West to East migration continued with 46 occupiers relocating out of the West End into the City – the highest figure since 2015 – while 14 moved the other way, broadly following trends of prior years.
Of the established companies, 326 occupiers expanded on their prior accommodation, equating to total expansion of 3.63 million sq ft. A further 91 occupiers reduced their space through relocation, a loss of 1.77 million sq ft, resulting in an overall expansionary market of +1.86 million sq ft.
The average distance moved by occupiers who relocated within Central London in 2023 was 0.86 miles, aligned with the results in 2022 but behind the 0.96 miles recorded in 2021.
Government and Public Sector occupiers, Media and Retail & Leisure businesses remained the most footloose.
Core locations, and submarkets bordering the core, remain the most attractive for investors, occupiers and developers, showcasing strong rental prospects and lower vacancy rates, compared with non-central locations.
2023 headlines
2023 NUMBERS
Overview
Active Occupiers
Future Investment Areas of Growth
2023 Migration Patterns
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A Comprehensive Analysis of the Who, What, why & Where of Office Relocations Across the UK capital
It is well known that the re-pricing of debt and risk over the last 18 months or so has impacted investment into Central London. Nevertheless, the agglomeration benefits of the market have not dissipated – Central London’s strengths remain and despite a slowdown, it continues to be the most liquid office market in the world and is well placed to bounce back when the economy and debt markets recover.
Despite the recent economic turmoil and structural shifts in the office sector, occupiers, landlords and developers continue to remain active. This is particularly true in core locations which offer strong rental prospects.
GLOSSARY
Established companies: comprises all occupiers that already have an office in Central Londo
Mover: an office move in/out of a submarket within Central London
Stayer: an office move within the same Central London submarket as the previous office
Relocator: an office move into a new Central London submarket
Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
GLOSSARY
Established companies: comprises all occupiers that already have an office in Central Londo
Mover: an office move in/out of a submarket within Central London
Stayer: an office move within the same Central London submarket as the previous office
Relocator: an office move into a new Central London submarket
Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
2023 NUMBERS
ACTIVE OCCUPIERS
NEW ENTRANTS
Market Movers
heena.gadhavi@cushwake.com
daryl.perry@cushwake.com
ben.cullen@cushwake.com
alistair.brown@cushwake.com
andy.tyler@cushwake.com
james.meikle@cushwake.com
martin.lay@cushwake.com
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Locations driving rental prospects
