VTS: London falls behind New York in office space demand

New data released by real estate technology company VTS show that, for the first time since the pandemic, London has fallen behind New York in demand for office space.

The February figures show that the London office market is sluggish, with just 111 new requirements totalling 1.2 million sq ft It is the third consecutive month that new requirements have been below the post-pandemic monthly average of 1.6 million sq ft.

“Overall, London is losing momentum,” the report states. “It stands at 6% below the pre-pandemic average and 19% below the same period last year.” The average deal size has been falling by 18% month over month, a sign that smaller occupiers are making a comeback in the market.

By contrast, New York is seeing growth, with February marking the fifth consecutive month of higher demand. Most new leases are for Class A and trophy assets, but rents have declined by 5% compared to 2023. New York, like London, has seen a fall in average requirement size.

In both cities demand is driven by FIRE (finance, insurance and real estate) tenants, accounting for 37% of all active demand in London and 38% in New York.

In NYC the technology, advertising, media and internet sector lost the second place to the ‘other’ sector, which includes public sector, healthcare, consumer goods, energy and charities. In London technology and media remains firmly in second place with a 23% share.

VTS, which is backed by CBRE and manages 13 billion sq ft of space on its platform, has provided the data on its new VTS 4 software, which sources intelligence from over 300 million data points across the platform to enable landlords to understand the market and predict tenant demand through enhanced data and AI-generated insights.

Described as “the industry’s only real-time dataset”, VTS 4 predicts tenant demand 6-9 months ahead of leasing activity. It also enables landlords and their agents to identify prospective tenants 3-4 months before they begin physically touring assets.

“The future of office, including how tenants explore the market, has been completely redefined,” said Ryan Masiello, chief strategy officer, VTS. “With prospective tenants looking at space online 90-120 days before physically engaging in the search process and touring 53% less space in-person than they did pre-Covid, it’s now paramount landlords prospect in the most effective way possible to capture leads before they become available to the general market and stand out.”

The VTS demand model aggregates data around three key areas of the platform: real-time supply and demand data, marketing analytics, and pricing data.