Central London Net Effective Rents Monitor Q4 2024

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

• The severe shortage of prime located grade A office stock and robust occupier demand across most central London sub-markets continues to exert upward pressure on rents. As a result, there have been several landmark lettings that have set new benchmark rents in some districts – including, for example, Marylebone and Victoria.
• The ongoing tightening of the grade A market is being primarily reflected in rising headline rents, although in some instances we are seeing modest downward adjustments to rent free period incentives.
• Overall central London net effective rents increased by 1.1% during the final quarter of 2024 (assuming a five-year lease). This took the total increase during the year to 5.9%, well ahead of the 2.6% achieved in 2023. The average rise in five-year prime net effective rents over the last three years (2022 to 2024) has been 4.2% per annum.
• Compared with net effective rents, prime central London headline rents rose by a slightly lower 0.8% during the fourth quarter, taking the annual figure for 2024 to 5.5%. The last three years have seen prime headline rents rise by 3.4% per annum.
• Central London prime net effective rents (assuming a five-year lease) have now climbed 16.7% above the bottom of the cycle in 2021. The West End has significantly outperformed, and is now 27.2% above the 2021 level, whilst Midtown is 18.6% higher and the City of London is 16.3% higher. In contrast, Docklands has seen an increase of only 4.1%, and rental levels have been broadly static over the last two years.
• Overall central London growth in the fourth quarter was primarily driven by the West End submarket, where several (but not all) districts saw rising headline rents. This contrasts with Q3, where the City of London was the primary driver of rental growth.
• The West End saw growth in prime net effective rents of 2.5% during Q4, following a brief hiatus in Q3. We have not seen any notable changes to typical rent free periods, and the prime headline rent therefore also rose by 2.5%. Modest rental growth during the first two quarters of the year took overall net effective rental growth for 2024 in the West End to 4.6% (assuming a five-year lease).
• There was no change to headline rents or typical rent free periods in Midtown during Q4 2024. However, strong rental growth earlier in the year meant that prime headline rental growth over the 12 months to Q4 was 7.7%. There was no notable change to typical rent free incentives during 2024.
• Prime net effective rents rose by a robust 1.2% in the City of London submarket during Q4 (assuming a five-year lease), with headline rents increasing by a lower 0.5%. Net effective rental growth during 2024 was an impressive 8.7%, with prime headline rents rising by 7.6%.
• As has been the case throughout the last two years, there was no change to headline rents or typical rent free periods in Docklands in Q4.
• Figure 1 illustrates the annual and quarterly change to prime net effective rents for central London and its submarkets. Figure 2 shows the movement in the level of prime net effective rents over the current cycle.

Trends by submarket and key districts

• The top performing West End district (and central London) in Q4 2024 was Marylebone, which saw its net effective rent rise by 5.5%.
• Victoria / Westminster saw by far the strongest net effective rental growth in the West End during 2024 at an impressive 11.8%, with Q4 seeing a rise of 2.7% (assuming five-year leases).
• Other West End districts have seen lower rates of rental growth over the last year. Paddington saw prime net effective rents rise by 3% during 2024, with no change during the fourth quarter. Historically, Paddington has tended to mirror the Victoria / Westminster district, but does not appear to be benefitting as an overspill location to the same extent as other districts (despite its location on the Elizabeth line). This may partly reflect a better perception of the convenience and quality of not only Victoria / Westminster, but also Midtown districts such as Covent Garden.
• Soho saw no change to prime headline rents in Q4, with a rise of 2.4% during 2024, well below the West End average of 4.6%. However, this is mainly due to a lack of prime stock meaning there have been few transactions to set new rent benchmarks for the area. In contrast, Fitzrovia has a greater supply of prime stock, and saw its prime headline rent move up to £100 per sq ft per annum in Q4 (compared with the previous £97.50 psf), with considerably higher levels being achieved on upper floors.
• Prime headline rents and rent free periods in the core Mayfair / St James’s district were unchanged during the first three quarters of 2024. However, growth resumed in Q4 2024, with the prime net effective rent rising by 3.4% (five-year lease), with prime space still in extremely short supply. The five-year prime net effective rent has risen by a colossal 48% since the low point of the pandemic.
• In Midtown, Holborn saw the second-highest rate of net effective rental growth of any central London district during 2024 as a whole, at 13.8% (five-year lease), although there was no change during Q4.
• Grade A vacancy levels are declining across the City of London submarket, underpinning rental growth. The pressure on quality stock is unlikely to ease significantly over the next 18 months, as the schemes due to complete are now largely prelet. Indeed, new space appears to be letting as rapidly as it is coming forward. Looking further ahead, there is considerable uncertainty about the level of stock coming through the pipeline after 2026.
• Performance in the City of London in Q4 was driven by some modest reductions in typical rent free periods in the City Core and City Fringe East submarkets, as well as a notable rise in the prime headline rent in the South Bank district (from £80.00 psf per annum to £82.50 psf per annum).
• Brazilian bank Banco Master has taken the 21,000 sq ft top floor of 22 Bishopsgate at a rent in excess of £120 per sq ft per annum. We believe the achieved rent to be a new record for the City of London, which is perhaps not surprising for the top floor of the City’s tallest tower (taking the building close to full occupancy). This is impacting the broader market, raising rental expectations for other City buildings, and this is likely to feed through to further rental growth this year. Similar examples of record rents leading the market can be found in the West End, for example the 220,000 sq ft preletting to BDO at The M in Marylebone, and Evercore’s preletting 135,000 sq ft of 105 Victoria St.
• The shortage of space and rapidly rising rents in many key central London locations is benefitting schemes further out. For example, One Olympia in Kensington is set to deliver over 550,000 sq ft of speculative office space by the end of this year, with floorplates of up to circa 73,000 sq ft. The scheme is receiving significant interest from potential occupiers currently in more central locations. It is interesting to note that relocations of his nature run counter to the pre-pandemic trend of locating close to a central pool of talent.
• Figure 3 shows the 10 districts with the highest prime net effective rental growth during 2024. These represent a broad mix of locations from across the City of London, Midtown and West End submarkets. Indeed, the top three performers consist of one district from each of these the submarkets. The core City of London district of Bank / Leadenhall Street saw the strongest rate of growth in 2024, at 15.7%, and 12 central London districts saw growth of more than 5% during the year.
• Figure 4 shows the five districts with the highest rental growth during Q4 2024.

Outlook

• Despite the ongoing uncertain economic and geopolitical climate, occupier demand should remain robust for well-located energy-efficient grade A space during 2025. We expect demand to be higher in the second half of the year, as a clearer picture around US trade policy emerges (assuming severe tariffs are not introduced), and further interest rate reductions take effect. However, letting activity across central London during 2025 is likely to be below trend reflecting the uncertain impact of US trade policy on the global economy.
• The imbalance between the demand for, and supply of prime space will be reflected in further increases in headline rents.
• Rent free periods are likely to be broadly static for most of 2025, although there may be some selective modest reductions in districts where vacancy levels are particularly low.
• The lack of supply, the very constrained development pipeline, and recent landmark lettings setting new benchmark rents are all coalescing to create an environment where developers are increasingly bullish. We are seeing this in rising asking rents, and also with some developers seeming in no hurry to accept discounts, on the basis that rents are likely to rise further during the year.
• As prime rents continue to increase and the shortage of quality space intensifies, occupiers may increasingly consider more peripheral locations in order to secure space that meets their sustainability and quality criteria. This could benefit locations such as White City (which has performed well due its connection with Imperial College), and even potentially Hammersmith and Docklands. Occupiers will face an increasingly difficult trade-off between achieving sufficient value in rental costs, optimising location for their staffing requirements, and finding a building of the right quality.

© 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.