Central London Net Effective Rents Monitor
Q1 2025

Our Central London Net Effective Rents Monitor illustrates the combined impact of changes to both prime headline rents and the typical length of rent free periods across 22 central London districts.

The Index also reflects different lease lengths by providing analysis of five and ten year leases, which can have a significant impact on the net effective rent for each district.

Note: the impact of the timeframe for the ingoing tenant to carry out its fitting out works has not been factored into the Carter Jonas net effective rent analysis simply because the timeframe will be influenced by the quantum of space to be leased.

Key trends

• Overall prime central London headline rents increased by 1.4% during Q1 2025. There were no changes to typical rent free periods in any of central London’s districts during the quarter.
• Over the 12 months to Q1 2025, prime central London net effective rents increased by 5.2%, slightly ahead of prime headline rents, which rose by 4.8%.
• During Q1 2025, the City of London submarket saw prime rents increase by 2.2%. This compares with 1.6% in the West End, and 0.7% in Midtown.
• During the 12 months to Q1 2025, the City of London saw prime net effective rents increase by 7.3%, ahead of Midtown at 6.0% and the West End at 4.9% (assuming a 5-year lease).
• The City of London was therefore the top performing submarket in terms of prime rental growth over both the last quarter and the last year.
• Docklands yet again saw no change to prime rental levels in Q1 2025.
• Figure 1 illustrates the change in prime net effective rents in central London and its key submarkets over the last quarter and the last 12 months (to Q1 2025).

Trends by submarket and district

• Rental growth in Q1 2025 was focussed across six central London districts, as shown in Figure 2. These include the core districts of the West End, Midtown and City submarkets:
  • In the West End, the prime headline rent in Mayfair and St James’s saw strong growth of 6.7% over the quarter, rising to £160.00 per sq ft per annum.
  • In Midtown, prime headline rents in Holborn rose by 3.0% in Q1, reaching £85.00 per sq ft per annum.
  • In the City of London, Bank / Leadenhall Street prime rents increased by 2.9% to £87.50 per sq ft per annum.
• Q1 2025 also saw notable rental growth in the City Fringe districts of Spitalfields and Farringdon (3.3% and 2.8% respectively). Farringdon remains the City of London submarket’s most expensive district, at £92.50 per sq ft per annum, although the rental gap with the core Bank/Leadenhall district has narrowed over the last year. The South Bank saw prime rental growth of 3.0% during Q1 2025, taking the prime headline rent to £85.00 per sq ft per annum.
• There have been landmark transactions over the last quarter, setting new benchmark rents for their locations. Key amongst them is private equity investor Generation Investment Management taking the remaining 58,500 sq ft at the M Building, Marylebone Lane, W1. Signed right at end of Q1, we understand the agreed rent to be above £160 per sq ft pa, the highest ever for Marylebone.
• The upper floors of Brookfield’s One Leadenhall, EC3, are understood to be under offer at a guide rent of £135 per sq ft pa. By comparison, the previous highest City tower rent was Banco Master leasing the top floor of 22 Bishopsgate in Q4 2024, at a rent understood to be £122.50 per sq ft pa.

• Looking at rental performance over the 12 months to Q1 2025, the majority of central London’s districts (with notable exceptions) have seen an increase in prime rents. The top 10 performing districts in terms of annual prime net effective rental growth are illustrated in Figure 3.
• The core City of London district of Bank / Leadenhall Street has seen the strongest growth out of the 22 districts that we monitor over the last 12 months, with prime net effective rental growth at an impressive 19.1% (assuming a five-year lease).
• Holborn also saw strong prime net effective rental growth at 13.3%, with Mayfair and St James’s in third place at 10.3% (assuming a five-year lease).
• Nine districts have seen prime net effective rental growth of more than 5% over the last 12 months.
• Several districts are notable in not having seen prime rental levels move upwards over the last year. In some cases, this is simply due to an excess of supply over demand – with East London / Docklands being the key example. To some extent, this is also true of Paddington, which is not benefitting as an overspill location to the same extent as other West End districts, despite its location on the Elizabeth line.
• However, in districts such as Bloomsbury and Soho, the reason behind the absence of rental growth lies not in a lack of demand, but on the supply side. With no significant schemes coming forward in these locations, there are simply no new benchmark rents to report. Indeed, we believe that were a scheme to come forward within a few minutes’ walk of the Elizabeth Line at Tottenham Cout Road tube station, we would witness a significant hike in headline rents that would undoubtedly set a new benchmark.

• The change in rental levels (expressed as an index) since 2020 across central London’s submarkets is shown in Figure 4. This illustrates the almost relentless growth prime rental levels post pandemic across central London’s submarkets (with the exception of East London / Docklands).
• Prime net effective rents in the West End submarket have increased by an impressive 29.2% since the bottom of the market during the pandemic (assuming a five-year lease). Midtown has seen an increase of 19.5%, with the City of London rising by a similar 18.9%.

Outlook

Occupier demand

The outlook for global economic growth has materially weakened since the US announced its ‘reciprocal tariffs’, and we can expect further volatility in the financial markets and uncertainty for corporate decision makers. Occupier demand in London is inevitably vulnerable to changing global economic conditions due to the international nature of its occupier base. However, as London’s office market is primarily driven by the service sector, which is not directly impacted by tariffs on physical goods, it should be relatively insulated from their more direct impacts.

The UK economic backdrop of continued subdued growth, rising employment costs and a likely acceleration in inflation is also unhelpful, although on the positive side we should see further base rate reductions this year.

The overall scale of impact on corporate demand for central London office space is hard to predict, but we note that demand has weakened a little since Q4, and is weaker than this time last year. Importantly, we do not expect a sharp fall in demand.

Demand for flexi office space (including serviced, managed, co-working space) has been strong post pandemic and should benefit further from the recent global economic uncertainty as occupiers increasingly adopt a ‘wait-and-see’ approach.

Supply

The outlook for supply is much more certain than that for demand. Not only is vacancy of grade A space historically low in most central London districts, but the development pipeline is significantly prelet. Indeed, our analysis shows that 62% of the space scheduled to complete during Q2-4 this year has already been let. Combined with a subdued level of development starts, this means that the availability of grade A space will not materially increase for at least three years.

This picture applies to most central London districts, with the notable exception of East London / Docklands, where quality supply remains more abundant. Even in the City of London, where vacancy rates are traditionally higher than in the West End, low grade A vacancy is a feature of the current cycle, with little available supply coming forward.

We may see a modest increase in tenant-controlled space, particularly if some firms make redundancies or reduce recruitment, but this is unlikely to translate into a significant amount of grade A space coming onto the market. Indeed, some occupiers are now finding that they need more, not less, space as they strive to increase the amount of time that employees spend in the office.

Rental trends

Against the current economic backdrop, the lack of high-quality office supply will underpin rental values. The next two to three quarters will likely see the market pause for breath, with headline rents broadly static.

That said, core districts such as Mayfair and St James’s could buck this trend and see some further modest upward rental movement, due to the extreme shortage of quality supply and continued occupier focus on these prime locations. We are likely to see further benchmark rents set during Q2, particularly in the core West End, although it should be noted that these (as well as the Q1 deals) will be based on heads of terms agreed well before the uncertainty resulting from the US tariff announcements.

Any impact of weaker demand conditions should be felt mainly through modest increases in typical rent free periods, which can act as a ‘shock absorber’, allowing landlords to maintain headline rents during periods of elevated uncertainty. Indeed, this occurred after the Brexit referendum, when the market was similarly undersupplied, and rent free periods absorbed what was a relatively short-term adjustment without impacting headline rents significantly.

© Carter Jonas 2025. The information given in this publication is believed to be correct at the time of going to press. We do not however accept any liability for any decisions taken following this publication. We recommend that professional advice is taken.