Central London Net Effective Rents Monitor
Q2 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

• Central London's prime office market saw headline rents (as an average across the whole market) rise by 1.3% in Q2 2025, driven by the ongoing shortage of grade A office space. In the 12 months to Q2 2025, prime rents are 5.6% higher, with growth picking up pace from last quarter.
• Meanwhile typical rent free periods are broadly unchanged since Q2 2024, with the shortage of grade A supply relative to demand being reflected through rising headline rents. As such, it has largely been the growth in headline rents that has driven the increase in net effective rents.
• The second quarter of the year saw record headline rents being achieved for new grade A space in the “super-prime” segment of the West End’s Mayfair district as occupiers compete for premium space. Reportedly, rents over £215 per sq ft per annum have been achieved on the most recent lettings on the upper floors at 77 Grosvenor Street (considered “super-prime”). Mayfair district’s prime headline rents have also seen strong growth, reaching £167.50 in the second quarter.
• In addition to Mayfair, the West End’s Marylebone, Fitzrovia and Victoria districts also saw robust rental growth. As a result, the West End submarket's prime rents rose by 3.8% over the quarter, outperforming all others and largely driving the overall central London increase.
• Midtown prime rents also advanced, albeit up by a more moderate 0.7%. The City of London, last quarter’s top performing submarket, saw prime headline rents increase by 0.5%.
• Year-on-year, growth in prime headline rents in the West End accelerated to 8.1%, surpassing the City as top performer, which has seen an increase of 6.7% since the second quarter of last year. Growth in prime rents in the Midtown submarket slowed to 5.2%.
• In the 12 months to Q2 2025, prime central London net effective rents (assuming a 5-year lease) increased by an average of 6.0%, compared with an annual increase of 5.2% reported last quarter.
• Docklands again saw no change to prime rental levels or net effective rents in Q2 2025, reflecting the static nature of rent free periods and headline rents
• 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 Q2 2025).

Quarterly trends by submarket and district

• Figure 2 highlights the six districts that have witnessed the highest rates of growth in net effective rents (assuming a 5-year lease) in the three months to Q2 2025.
• Four of the top six districts fell within the West End submarket, where strong pre-letting activity and an ongoing acute shortage of available best-in-class space is driving headline rental growth.
  • The strongest growth over the quarter was in the Marylebone district, with typical headline rents for new grade A space rising by a substantial 9.5% to £115.00 per sq ft per annum.
  • Fitzrovia has also seen healthy growth, increasing by 5.0% to £105.00 per sq ft per annum over the same period
  • Mayfair and St James’s, where the growth in prime rents was the strongest last quarter, has maintained an upward trend, rising by 4.7% to £167.50 per sq ft.
  • Victoria and Westminster saw prime rents increase by 2.6% to £97.50 per sq ft per annum.
  • All West End districts continue to command higher rents for new grade A space than elsewhere, with the sole exception of Paddington (£85.00 per sq ft per annum), which is surpassed by Farringdon (the fringe City of London’s most expensive district at £92.50 per sq ft per annum, reflecting the fact that area is served by an Elizabeth Line station).

• Both Covent Garden in the Midtown submarket and the South Bank saw a quarterly increase in prime rents of 2.9%, rising to £90.00 and £87.50 per sq ft per annum, respectively.

Notable leasing activity

• Several landmark lettings have taken place during the second quarter of the year.
• In Mayfair, law firm McDermott Will & Emery pre-leased all 115,000 sq ft of the office space at The Lazari Building at 7 Brook Street, the former Fenwick department store, for a 15-year term. This is the largest transaction reported in Mayfair since Blackstone took a pre-let on 226,000 sq ft on the former Lansdowne House site at Berkeley Square and Millennium Management pre-leased 175,000 sq ft at 50 Berkeley Street in Q3 2022 and Q4 2022, respectively.
• Global investment firm CD&R is significantly upsizing in St James', pre-leasing the entire 62,500 sq ft at 30 Duke Street for a 15-year term with no break option. Rents are understood to be at around £190 per sq ft per annum, ahead of levels previously seen in the district.
• In the City, global investment management Squarepoint has pre-leased over 400,000 sq ft at 65 Gresham Street on a 20-year lease. The firm is relocating from Citypoint (also in the City) where it occupies around 100,000 sq ft.
• There were also two significant lettings during the second quarter of the year in the South Bank submarket at the newly refurbished 76 Southbank. Lego is relocating from New Fetter Lane, EC4 to occupy 190,000 sq ft, while PayPal is relocating from the City to occupy 40,000 sq ft. Both relocations are understood to represent an increase in the property footprint for each company.
• In a notable upsizing move, JP Morgan has taken 150,000 sq ft of overflow space at One Cabot Square in the Docklands submarket, a decision largely influenced by the bank’s strict return-to-office policy. The submarket has faced negative press in recent years, and has been characterised by weak take-up with several anchor tenants relocating. However, alongside recommitment from the financial services sector (Barclays and Morgan Stanley renewed their leases in 2023 and 2024 respectively), the JP Morgan letting should be seen as a vote of confidence in the submarket.

Longer term trends by submarket and district

• The top 10 performing districts in the 12 months to Q2 2025 by prime net effective rental growth are illustrated in Figure 3.
• All districts in the City of London submarket other than City Fringe East (Aldgate East) have seen an increase in prime rents over the last year, though to varying extents. The Bank/Leadenhall district saw the strongest growth at 16.7% (as the top performer of all 22 districts we track), with City Fringe North (Farringdon) at the other end of the scale at 2.8%.
• However, a modest reduction in typical rent free periods in the City of London submarket has boosted net effective rents over the past year which has outpaced growth in headline rents. Bank/Leadenhall Street’s net effective rent has risen by an annual rate of 19.1%.
• By contrast the City Fringe East (Aldgate East) district has seen a 1.1% increase in net effective rents.
• Quarterly gains in rents have boosted the annual growth rate across most West End districts. With no movement observed in rent free periods, increases in net effective rents aligns with prime rental growth. Marylebone and the Mayfair/St. James’ districts have seen substantial increases of 15.6% and 15.5%, respectively. Meanwhile, the Paddington and Soho districts have held firm over the last year with steadier leasing observed (compared to the other West End Districts).
• Annual growth in net effective rents in the Holborn district of Midtown remains at a robust 13.3%, and the South Bank submarket has seen an acceleration to 12.9%.

• The change in net effective rents (expressed as an index) since 2020 across central London’s submarkets is shown in Figure 4. This reflects the strong upward trajectory in prime rental levels post pandemic across central London’s submarkets (with the exception of East London / Docklands).
• Prime net effective rents continue their recovery across these submarkets. The West End is now 34.1% higher than at the bottom of the market during the pandemic (assuming a five-year lease) as recent strong performance has caused growth to diverge further from the other submarkets (see figure 4). Midtown has seen an increase of 20.3%, with the City of London rising by a similar 19.8%.

Outlook

Occupier demand

The global economic outlook has improved from earlier this year as the US has struck tariff agreements with several key markets including the UK, the EU, and Japan. This caused the International Monetary Fund to revise its growth forecasts upwards in July, although growth is still anticipated to be lower than in 2024. However, ongoing geopolitical risks and the new US tariffs announced in August on countries such as India and Canada will likely keep global businesses with UK operations in a cautious mindset.

The second quarter saw the completion of several large and long-term leases of grade A space. This, coupled with a shortage of large-scale prime stock, has contributed to an uplift in rental values, particularly in the West End. These transactions indicate businesses are taking a long-term view, reflecting a strong level of confidence from the London business community.

Three primary factors are motivating this leasing activity: a proactive approach to growth; a need for high-quality, sustainable space that reinforce environmental initiatives; and the implementation of HR policies that address return-to-office, recruitment, retention, and employee wellness. Each help future-proof operations while aligning with increasingly important environmental and social responsibility objectives.

High-growth sectors, particularly finance/investment and business services, are spearheading the trend towards expansion. The examples above highlight their confidence in their direction of growth, with some significantly increasing their floorspace. It is also influenced by approaches to the post-Covid return to office, with increased anecdotal evidence of businesses introducing policies for office attendance, either full-time or for a certain number of days. This has positive implications for the need for office space and continued market recovery.

Further, there is strong demand for high-quality, sustainable space, driven by strategic considerations, such as corporate ESG goals, brand reputation and a need to maintain a competitive edge as an employer. Properties excelling in amenities, design and sustainability are in short supply and so can command premium rents. Our recent research on the sustainability of the UK's office stock points to slow gains in London's office energy performance (a vital aspect of property quality). Consequently, the supply-demand imbalance for offices that meet occupier expectations will likely continue, maintaining a competitive market.

Supply

Recent increases in prime rental levels are attributed to a dearth in available grade A space. Demand for high-quality offices can be seen in strong pre-leasing activity, both for new and refitted developments.

By the end of Q2 2025, London's office market had almost 8.5 million sq ft of new or refitted space under construction set to complete by the close of 2026 (Glenigan and Carter Jonas research). However, pre-leases have already been announced for a considerable 45.0% of these developments (by floorspace).

This pre-letting activity is even more pronounced in some submarkets. In the City of London’s core, a remarkable 69.8% of the pipeline is pre-let, leaving less than 1 million sq ft of available office space expected by the end of 2026. In Midtown, 73.7% pre-let and a mere 390,000 sq ft is available in this timeframe.

We estimate the average amount of space available is 99,500 sq ft, indicating that companies looking for new space of scale (with demand seen in the leasing of new HQs this quarter) will need to look much further ahead. For instance, 65 Gresham Street has been pre-let by Squarepoint, but is not due to start construction until 2026, with completion expected in 2029.

While London's immediate supply is tight, several large schemes that have received planning permission are set to deliver substantial new office space, predominantly within the City. For example, The Undershaft and The Diamond (100 Leadenhall Street) are each set to introduce over 1 million sq ft of new office space, and 55 Bishopsgate and XI House (70 Gracechurch Street) will each add over 800,000 sq ft. However, even assuming construction proceeds as planned, these major developments are not expected to reach completion until at least 2029, with some projected for 2030-2032. In the meantime, demand could begin to shift eastward to the Docklands submarket, drawn by more available space, greater affordablity, and the enhanced connectivity of the Elizabeth Line.

© 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.