Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
London Office Market Sees Record Rents and Vacancies Simultaneously
London’s office market is currently experiencing a paradox, with both record rents and record vacancies being reported at the same time. This situation reflects a market split into two distinct streams, creating different opportunities for landlords and investors.
According to data from SHB Real Estate, the average Grade A City rent reached £80.43 per square foot in the first quarter of 2026, marking a 15% year-on-year increase. Grade A space in the City Core starts from around £70 per square foot, while in the wider West End, rents begin at £45. In fringe markets such as Canary Wharf, Grade A unfitted space is available from £40 to £65, and in Stratford, from £35 to £45.
Vacancy rates rise quickly outside the city centre. Hammersmith has a vacancy rate of 22%, and Vauxhall stands at 18%, with much of this vacancy attributed to ageing office stock. Well-connected locations that can still command meaningful rents, without competing at City Core pricing, are attracting increased occupier demand.
For landlords and letting agents, the market presents two contrasting scenarios. Some office buildings are fully let with landlords receiving competing bids, while others are losing tenants and offering incentives such as rent-free periods. The demand for high-quality, modern office space is being driven by businesses seeking to attract top talent, even at higher price points.
The approaching 2031 deadline for energy performance certificate B for privately rented commercial buildings over 1,000 square metres is also influencing the market. Landlords of older, secondary office stock must decide whether to invest in upgrades or consider exiting the market, potentially absorbing recent losses in value.
Competition for Grade A office stock is strong, with both landlords and owner-occupiers seeking prime assets. Lenders are responding by offering more generous criteria and specialist finance options, including large loan sizes and commercial mortgages tailored to acquiring best-in-class assets. Specialist finance brokers are also providing access to a wider range of lenders and products suited to different buyer profiles.
With yields stabilising and lower mortgage rates available compared to recent years, confidence is returning to parts of the London office market.
Source: Mortgage Strategy