London Office Market Review 2026

Last updated August 2026, using Q2 and H1 2026 data from Knight Frank, Savills, CBRE, Cushman & Wakefield and Deloitte.

Overview of Current Market Conditions

The London office market reached the halfway point of 2026 in a notably tighter position than it entered the year. Knight Frank recorded Central London take-up of 3.08 million sq ft in Q2 2026, up 23.8% on the first quarter and 11.1% above the long-term quarterly average ^[1]. CBRE, which measures on a slightly different basis, put the quarter at 2.7 million sq ft, 19% ahead of Q1 but 7% below its own ten-year quarterly average and 14% below Q2 2025 ^[3]. The two houses agree on direction — activity accelerated sharply through the spring after a slow start — but differ on whether the quarter cleared trend.

Supply has continued to contract. Availability fell 5.8% over the quarter to 21.58 million sq ft, taking the London-wide vacancy rate to 8.0% against a long-term average of 7.7% ^[1]. Savills, measuring Central London on a narrower stock base, recorded supply of 18.6 million sq ft and a vacancy rate of 7.2% at the end of May ^[2]. CBRE noted that Central London supply has “returned to its long-term trend level for the first time since 2022” ^[3]. The headline rate, though, conceals the real story: vacancy in genuinely new space stands at just 1.6% ^[1].

The single biggest change from twelve months ago is who is doing the leasing. Technology, media and telecoms overtook financial services as the largest source of demand, accounting for 25.4% of Q2 take-up across London and 35.1% in the West End, where TMT leasing ran 125% above its long-term average ^[1]. Artificial intelligence occupiers alone took 705,371 sq ft in the first half of 2026, against 165,819 sq ft in the same period of 2025 ^[3]. For organisations reviewing their office costs in London, this new source of competition for the best space has direct consequences for both pricing and availability.

Headline prime rents have plateaued at record levels rather than continuing to climb. Knight Frank held its prime figures at £185 per sq ft in the West End Core and £102.50 per sq ft in the City Core through the first half ^{[1] [5]}. Achieved rents on trophy space, however, kept rising: Savills reports average achieved prime rents of £135.00 per sq ft in the City, up 35% year on year, driven by a small number of tower transactions ^[2]. The gap between headline and achieved reflects a market where a handful of buildings can command almost any price and the rest cannot.

Key London Office Market Stats (Q2 / H1 2026):

Data sources: [1] Knight Frank London Office Market Report Q2 2026, [2] Savills Central London Office Market Watch June 2026, [3] CBRE Central London Office Figures Q2 2026, [4] Savills Central London Office Market Watch Q1 2026

A note on comparing figures: Knight Frank, Savills, CBRE and Cushman & Wakefield each define Central London, prime rent and take-up slightly differently, which is why ranges appear above rather than single numbers. Each figure is attributed to the house that published it and should not be blended across sources.

Leasing and Vacancy Trends

Leasing in the first half of 2026 followed an unusual shape: a subdued opening quarter followed by a strong rebound. Take-up in Q2 reached 3.08 million sq ft, with new and refurbished space making up 69.6% of it ^[1]. Savills, measuring year-to-date through May, recorded 3.4 million sq ft, around 4% below the long-term average, of which 92% was Grade A ^[2].

The composition of that demand has shifted decisively. Only one deal above 100,000 sq ft completed in Q2, compared with four in Q1, but the middle of the market was busy, with four transactions in the 60,000 to 100,000 sq ft band totalling 336,372 sq ft ^[1]. Sector shares for the quarter were TMT 25.4%, financial 22.1% and professional services 21.0% ^[1] — a marked change from 2025, when insurance and financial occupiers dominated. In the City specifically, Savills recorded professional services leading at 25% of Q1 take-up, with insurance and financial down to 20% from 34% across 2025 ^[4].

The AI Effect

Artificial intelligence occupiers moved from a rounding error to a market force in the space of eighteen months. CBRE recorded 705,371 sq ft of AI take-up in H1 2026, more than four times the 165,819 sq ft transacted in H1 2025, with 450,816 sq ft of that landing in the second quarter alone ^[3]. The largest Central London deal of Q2 was Anthropic’s 158,138 sq ft letting at 1 Triton Square, NW1 ^{[1] [2]}. OpenAI signed an 89,975 sq ft pre-let at Jahn Court, N1 in the same quarter ^[1], and earlier in the year Databricks pre-let 135,000 sq ft at 10 Howland Street, W1 ^[4]. To put the shift in scale: AI occupiers took more space in the first six months of 2026 than in the whole of 2025, when the sector accounted for 317,979 sq ft ^[3].

This matters for anyone planning an office fit-out because these occupiers behave differently from traditional corporate tenants. They move quickly, scale unpredictably, and concentrate in the North of Oxford Street and Fitzrovia submarkets, where they are now competing directly with the media and professional firms that have historically occupied that stock.

Supply Constraint at the Top of the Market

The flight to quality has produced a genuine shortage. Across London, vacancy in new-build space stood at just 1.6% at the end of Q2, against 4.4% for refurbished stock and 1.9% for second-hand space ^[1]. Knight Frank’s submarket data shows new and refurbished vacancy of 4.7% in the City Core and 3.7% in the West End Core, with King’s Cross/Euston tighter still at 2.7% ^[5]. Savills counted just 19 Grade A options of 100,000 sq ft or more available now or within six months across Central London, only two of them in the Core, against 28 active occupiers with requirements of that size ^[2].

Active demand reinforces the point. Knight Frank put requirements of 10,000 sq ft and above at 14.3 million sq ft at the end of Q2, up 18.6% on the quarter and 47.5% above the long-term trend — a record. Notably, 6.8 million sq ft of that demand comes from occupiers whose lease events fall in 2029 or later ^[1]. Savills recorded a comparable record of 15.9 million sq ft at the end of May, including 11.1 million sq ft of requirements above 50,000 sq ft ^[2].

Divergence Between Submarkets

The gap between the best and the rest continues to widen. Knight Frank’s Q2 Spotlight puts overall vacancy at 5.8% in the West End Core and 6.1% in the City Core, against 12.8% in Clerkenwell/Farringdon, 17.5% in Vauxhall/Battersea, 17.9% in White City and 24.6% in Stratford ^[5]. Prime rents follow the same distribution, from £185 per sq ft in the West End Core down to £48.50 in Stratford. Rent-free periods have converged at around 24 months in the core submarkets, stretching to 27 to 30 months in Canary Wharf and the wider Docklands ^[5].

Some smaller submarkets moved noticeably in Q2. Bloomsbury prime rents rose 6.1% to £87.50 per sq ft, King’s Cross/Euston 2.6% to £97.50, and Canary Wharf to £62.50 ^[1]. Mayfair vacancy sits at 3.4%, equivalent to roughly twelve months of supply, with 54% of space due for delivery by the end of 2027 already pre-let ^[4].

Pre-Letting Has Become the Norm

The clearest sign of scarcity is how far ahead occupiers are now committing. Pre-lets accounted for 40% of City space let in Q1 2026 — 550,624 sq ft, the highest first-quarter total on record ^[4]. The largest was Herbert Smith Freehills Kramer’s 268,000 sq ft pre-let at 1 Appold Street, EC2, at a blended £104 per sq ft ^[4].

Savills’ occupier research puts the average lead time between launching a search and completing a lease event at 52 months for occupiers seeking more than 100,000 sq ft ^[10]. Knight Frank measures it differently but reaches the same conclusion: searches for pre-lets of 50,000 sq ft and above now begin 38.4 months ahead of target occupation, rising to 50.6 months for requirements above 200,000 sq ft ^[11]. Four years of lead time is now normal for a large requirement. For those considering financial services office design or any other specification-heavy fit-out, that timeline has to be built into the property strategy from the outset.

Investment and Development Trends

Investment has been the weak spot of 2026 so far. After a strong 2025, in which London office investment reached £9.3 billion, up 45% year on year, with 25 deals above £100 million and eight above £250 million ^[7], the first half of 2026 has been considerably quieter. Knight Frank recorded £1.93 billion in Q1 and £2.03 billion in Q2, the latter running 30.2% below the long-term quarterly average ^[1].

Q2’s total was also heavily skewed by a single transaction: Barclays’ £750 million purchase of 1 Churchill Place, E14 ^[1]. Strip that out and the underlying picture is thinner still. Lots above £100 million made up 67.2% of turnover, or just under £1.4 billion, though this was still 25.9% below trend ^[1]. The West End accounted for 44.8% of all London turnover at £0.91 billion, with Mayfair and St James’s alone representing 65.9% of West End volume; City and Southbank investment fell to £0.37 billion, 76.8% below its long-term average ^[1].

Forward indicators are more encouraging. £2.6 billion of assets were under offer at the end of Q2, 11.1% above the long-term average, with £4.6 billion of stock available ^[1]. In the West End specifically, £1.8 billion was under offer, 83.7% above trend ^[1]. Knight Frank’s Active Capital survey found that 87% of global investors by assets under management plan to increase their commercial real estate allocations in 2026, with $144 billion of planned deployment and the UK the single most-targeted destination at 60% ^[18].

Set against an H1 run rate of roughly £4 billion, Knight Frank’s February forecast of £12 billion for the full year ^[7] now looks demanding. It would require a second half roughly twice as active as the first. The volume of stock under offer makes a stronger H2 plausible, but the forecast should be read as an optimistic case rather than a base case.

Prime yields held steady through the first half at 3.75% in the West End and 5.25% in the City and Southbank ^[1]. Buildings that meet strict sustainability and energy performance standards continue to attract the strongest investor interest.

The Development Pipeline Is Thinning

Around 14.12 million sq ft was under construction across London at the end of Q2 2026, down 9.2% year on year, of which only 24.5% is pre-let and 10.7 million sq ft is speculative ^[1]. Completions in Q2 totalled 1.4 million sq ft, 31.2% pre-let, the largest being One Olympia in W14 at 532,717 sq ft ^[1].

The forward picture is where the constraint bites. Deloitte’s London Office Crane Survey recorded 4.8 million sq ft of new starts in 2025 across 57 schemes, down 35% year on year and well below the five-year average of 6.5 million sq ft ^[8]. New-build starts halved to 1.6 million sq ft, while refurbishment accounted for 66% of all new starts ^[8]. Deloitte explicitly flags a potential supply gap between 2027 and 2030. Knight Frank reaches the same conclusion from the other direction: the 10 million sq ft of speculative space under construction for 2026 to 2029 represents just 1.7 years of average new and refurbished take-up ^[11], and it projects London will be undersupplied by 10 million sq ft by the end of 2030 ^[1].

Development economics explain why little new supply is coming forward. Knight Frank’s modelling puts the headline rent required to clear the cost-of-capital hurdle on a 2029 delivery at £91.50 per sq ft in the City Core and £138.00 per sq ft in the West End Core ^[9]. Both sit comfortably below prevailing market rents, and Knight Frank finds viability margins are now widening as rental growth outpaces cost inflation ^[9]. That said, costs are still climbing: BCIS forecasts all-in tender prices rising 2.9% across 2026 and 15.5% over the five years to 2031 ^[19], which keeps the hurdle moving.

The consequence is that more than half of future supply is now refurbishment-led, as landlords favour upgrading existing buildings over ground-up development. Knight Frank estimates that upgrading London’s ageing office stock could create £11.4 billion in annual rental income and £262 billion of investment value ^[9]. This shift towards office refurbishment reflects both the economics and the pressure to improve building performance.

Workplace Trends, Fit-Out Implications & Future Outlook

The Quality Premium and What It Means for Fit-Out

The concentration of leasing in Grade A space is no longer a preference but a requirement. Savills recorded 92% of year-to-date 2026 take-up in Grade A buildings ^[2], while Cushman & Wakefield put the Q1 figure at 85% ^[6]. New and refurbished space accounted for 69.6% of Q2 leasing on Knight Frank’s measure ^[1].

Fitted space has become the default at the smaller end of the market, which is the most significant practical development for occupiers of under 10,000 sq ft. Savills found that more than two-thirds of sub-10,000 sq ft West End transactions, and more than 80% of sub-5,000 sq ft deals, were let on a fitted basis in Q1 2026 ^[4]. Fitted and managed transactions rose 22% across 2025 ^[10]. Landlords offering Cat A+ or fully fitted space are leasing faster and achieving stronger rents, while shell-and-core buildings in secondary locations face longer void periods.

For tenants, this means the fit-out investment has become a strategic consideration rather than a cost managed after the lease is signed. Engaging with a design-and-build partner early, ideally alongside the property search, helps ensure the workspace brief, budget and programme align with what the market can actually offer. In a project for PJT Partners in Mayfair, this integrated approach was central to delivering 48,000 sq ft of workspace that met the exacting standards of a global advisory firm within a competitive timeline.

Sustainability: The Regulatory Position Has Changed

Energy efficiency requirements shifted materially in June 2026, and any workplace strategy written before then needs revisiting.

On 18 June 2026, the Government published its interim response to the non-domestic private rented sector MEES consultations. Two changes matter ^[12]:

• The proposed interim EPC C milestone for 2027 will not be taken forward.
• The EPC B requirement moves to 2031 and is proposed to apply only to privately rented buildings over 1,000 square metres in England and Wales, and then only where cost effective. Buildings below that threshold remain subject to the existing EPC E minimum.

The seven-year payback test and existing exemptions remain in place. This is an interim response, with the full response and draft legislation still to come, so the position may develop further.

The practical effect is a longer runway, not a reprieve. CBRE estimates that 58% of Central London office stock sits below EPC B ^[13], and separately found that 94% of the 12.6 million sq ft returning to the market by end-2027 was rated below EPC C, requiring around £370 million of upgrade expenditure ^[13]. Occupiers of demises under 1,000 square metres now have less regulatory pressure than previously expected — but lender scrutiny, investor requirements and corporate reporting obligations have not moved, and the market has largely continued to price building performance regardless of the statutory deadline.

Occupier behaviour bears this out. Savills recorded 63% of space acquired in April 2026 in BREEAM Excellent or Outstanding buildings ^[22], and 68% of 2025 City lettings in the same category, up from 64% in 2024 ^[23]. Smart office design incorporating energy-efficient lighting, modern HVAC and real-time performance monitoring is a baseline expectation rather than a differentiator.

Flexible Workspace and Hybrid Working

Flexible workspace now accounts for around 12% of the total London office market, and CBRE forecasts this reaching 20%, or roughly 50 million sq ft, by 2030 ^[14]. Rather than displacing conventional leasing, flex has settled into a defined role, used to manage growth, portfolio risk and shorter-term operational needs alongside longer commitments. Savills reports that 53% of operator deals are now structured as management agreements rather than conventional leases ^[20].

Office attendance continues to recover. Remit Consulting recorded UK office occupancy of 44.1% in the week ending 30 January 2026, the highest weekly level in its survey’s history ^[15]. The effect on the market is smaller but higher-specification requirements, with re-gears accounting for a substantial share of activity as occupiers weigh staying and upgrading against moving ^[7]. For those exploring different procurement routes, understanding the design-and-build approach versus traditional methods can materially affect timelines, costs and outcomes when securing premium space.

Market Polarisation and What It Means for Occupiers

The performance gap between prime and secondary stock is now structural. Knight Frank’s analysis shows prime headline rents in the City Core have risen 41.4% since 2019, from £72.50 to £102.50 per sq ft, while West End Core prime rents have grown 60.9%, from £115.00 to £185.00 ^[9]. Over the same period, secondary stock in poorly-connected submarkets has seen vacancy climb into the high teens and above ^[5]. For a detailed comparison of current pricing across all London submarkets, see our guide to office rents in London.

The practical consequence is that delaying decisions carries a growing cost. Knight Frank identifies more than 5,000 leases expiring between 2026 and 2030, covering close to 55 million sq ft, with the City Core alone accounting for 17.9 million sq ft — a third of all London expiries ^[11]. Its earlier work found that 65% of occupiers with expiries to 2030 are expected to be constrained by the space available to them, and that City Core, Marylebone and Soho each hold less than 15 months of vacant supply ^[7].

Savills adds a further dimension: 60% of occupiers with active requirements currently sit in buildings that have not been substantially refurbished in more than a decade, and 30% of active demand — some 4.5 million sq ft — comes from occupiers in situ for more than fifteen years ^[10]. That backlog of deferred moves is a large part of what is driving record active demand. It reinforces the importance of space planning that aligns commercial objectives with realistic market timelines. For organisations weighing the costs of a move or refurbishment, a clear understanding of fit-out costs alongside these dynamics is essential to building a sound business case.

Forecast for the Rest of 2026 and Beyond

With half the year behind us, the shape of 2026 is reasonably clear. Four forces will define the next eighteen months.

Supply tightens from 2027, not 2026. This year is actually a record one for delivery. Savills expects 51 schemes to complete across Central London in 2026, totalling 8.5 million sq ft — a new record — of which around two-thirds is already pre-let ^[21]. In the City specifically, completions are forecast to reach 4.85 million sq ft, 39% above the long-term average, with 37% of the remaining pipeline pre-let, rising to 53% in the City Core ^[4]. The constraint arrives afterwards: West End completions fall to just 1.6 million sq ft by 2028 ^[4]. With new starts down 35% in 2025 ^[8] and a three-to-four year construction cycle, the 2028 to 2030 period is where the shortfall concentrates.

Rental growth continues, weighted to the City. CBRE forecasts City core prime rents reaching £93.00 per sq ft by the end of 2026 and West End core reaching £200.00 per sq ft ^[17]. Knight Frank’s longer view puts City Core at £129.75 and West End Core at £227.50 by 2030 ^[9], and expects London to record Europe’s strongest prime rental growth over 2026 to 2030 ^[16]. On the supply side, Savills recorded end-Q1 vacancy of 7.0% in the City and 7.8% in the West End ^[21], both of which have edged down rather than up over the past year. For the latest submarket figures, see our regularly updated guide to London office rents.

Investment needs a stronger second half. Knight Frank’s £12 billion full-year forecast ^[7] requires H2 volumes roughly double those of H1. The £2.6 billion under offer at the end of June ^[1] and the strength of stated investor intent ^[18] both support a recovery, but the first half fell well short of the run rate that forecast implies. Prime yields at 3.75% in the West End and 5.25% in the City look settled ^[1]. Over the next five years, London is projected to add around 186,000 office-based jobs, well ahead of any other European city ^[16].

The retrofit wave continues, on a longer regulatory timetable. The move of the EPC B requirement to 2031 and its narrowing to buildings above 1,000 square metres ^[12] removes some near-term urgency, but the commercial case is unchanged: refurbishment already accounts for 66% of new development starts ^[8], and occupiers continue to concentrate in the best-performing buildings regardless of statutory deadlines. Buildings upgraded to meet modern sustainability, amenity and workplace flexibility standards will attract both occupier interest and investor capital. Those that cannot be economically upgraded are more likely to convert to alternative uses, reducing total office supply and further supporting rent resilience.

For organisations planning workplace changes, the window to secure the best space is narrowing. With four-year lead times now standard for larger requirements ^{[10] [11]} and 55 million sq ft of leases expiring by 2030 ^[11], the organisations that plan ahead, engage with relocation planning early, and commit to workspace strategies grounded in clear operational and commercial objectives will be best positioned.

K2 Space has delivered workplace transformations across London for more than 20 years. Our integrated approach brings together design, fit-out, furniture, and move management under a single team, a defined timeline, and a fixed budget. From investment firms to international law practices, our work spans the sectors driving London’s office market forward.