The great central London office crisis

Far from being killed off by the pandemic, the office is back - so much so that the City is running out of space. By Jonathan Prynn

- By Jonathan Prynn

Five years ago, in the depths of the Covid pandemic, a frenzied "race for space" propelled London's residential property market.

City dwellers were falling over themselves to swap one beds in town for detached houses in the 'burbs with gardens, home studies - and room to breathe. Now London is facing a new property stampede. But this time, remarkably, and against virtually all expert predictions during those work-from-home years of 2020 and 2021, it is office space that is in hottest demand - and worryingly short supply. Just as London seems incapable of solving its housing crisis, now it faces a potential office crisis as well. And it is going to get worse.

Such is the scale of the shortage that records are being smashed for office rents in the City as occupiers snap up the space that does become available. Last week it emerged that a new high of £160 a square foot was achieved for the 32nd and top floor of the One Leadenhall tower.

According to reports from CoStar News, San Francisco-based cryptocurrency group Ripple Labs has leased 90,000 sq ft of space in the development, next to Leadenhall Market. One analyst estimated the firm will be paying £10 million a year in rent for its swanky new quarters, which come with a large roof terrace. The deal has set a remarkable new high watermark for the Square Mile. But across the

City lettings above the £100 per sq ft level - once unheard of - are becoming commonplace, particularly in the most in-demand area around Liverpool Street station, now Britain's busiest rail terminal.

According to research from Knight Frank, 170 deals with three-figure per square foot rent were completed in central London last year. Prime rents in what property folk call the West End Core rose 15.6 per cent to a record £185 per sq ft, while those rents in the City Core reached £102.50 per sq ft, a 7.9 per cent annual increase.