London office demand falls behind New York

The pace of office demand in London has dropped behind New York for the first time since the pandemic began, according to the latest VTS Office Demand Index. In London, 111 new requirements totalling 1.2m sq ft entered the market in February. This marked the third consecutive month of new requirements coming in below the post-pandemic monthly average of 1.6m sq ft. The February total was 6% below that pre-pandemic average and 19% below the same period last year. However, VTS noted the number and total sq ft of new requirements were up by 44% and 18% respectively, compared with January this year. The average deal size fell by 18% month-on-month, indicating that smaller occupiers are making a comeback in the market. The decreases contrast with growth seen in the New York market, with February marking the fifth consecutive month of growing demand by sq ft since the onset of the pandemic. The majority of those deals stemmed from Midtown leases for class-A and trophy assets, with starting rents dropping 5% versus those executed in 2023. In 2023, 13% of deals had starting rents of more than $150 (£119) per sq ft, but so far in 2024 there have not been any deals with the same starting rent. Tenants actively sought 30.6m sq ft of office space in New York in February, while in London, there was 13.1m sq ft. Photo © Mark-Boss/Unsplash