Central London Net Effective Rents Monitor Q1 2026

Our Central London Net Effective Rents Monitor illustrates the combined impact of changes to both prime headline rents and the typical length of rent free periods across 22 central London districts.

The Index also reflects different lease lengths by providing analysis of five and ten year leases, which can have a significant impact on the net effective rent for each district.

Note: the impact of the timeframe for the ingoing tenant to carry out its fitting out works has not been factored into the Carter Jonas net effective rent analysis simply because the timeframe will be influenced by the quantum of space to be leased.

Key trends

• Headline rents rose by an average of 0.8% in Q1 2026 across central London’s prime office markets. This marks a modest acceleration compared with the softer growth recorded in Q3 2025 (0.4%) and Q4 2025 (0.1%).

• Overall rental growth was once again underpinned by continued strength in the West End’s Mayfair and St James’s districts, where prime headline rents increased by a robust 5.9% in Q1 2026, up from 1.5% in Q4 2025. The district remains the top performer on both a quarterly and an annual basis.

• Quarterly increases in headline rents were also recorded in the City of London’s banking and insurance district, Midtown’s King’s Cross district and West End’s Fitzrovia district. Robust leasing demand, combined with limited near‑term availability, has placed upward pressure on rents across these districts.

• Annual headline rental growth across central London has continued to moderate, easing from a peak of 5.6% in Q2 2025 to 2.5% in Q1 2026.

• While the West End is the sole submarket to record an acceleration in annual headline rental growth, other submarkets have seen growth stabilise or soften. Even so, headline rental trends remain on an overall upward trend.

• There is a divergence between slower annual growth and strengthening quarterly momentum. This reflects weaker quarterly performance through mid to late 2025 and the earlier period of exceptional growth, particularly in the City of London, South Bank and Midtown, falling out of the year on year comparison, despite a moderate rebound in Q1 2026.

• With typical rent free periods broadly unchanged in the 12 months to the end of Q1 2026, shifts in market dynamics are instead being captured through changes in headline rents. As a result, increases in net effective rents are broadly mirroring the growth seen in headline rents.

• The City of London is the only submarket to deviate from this trend, with annual growth in net effective rents on both 5‑ and 10‑year leases exceeding prime rental growth, reflecting a slight reduction in lease incentives over the year to Q1.

• Figure 1 illustrates the change in prime net effective rents in central London and its key submarkets over the last quarter and the last 12 months (to Q1 2026).

Quarterly trends by submarket and district

• As an average across all London office submarkets, prime headline rents increased by 0.8% from Q4 2025 to Q1 2026, up from 0.1% during the previous quarter.

• With no movement in typical rent‑free periods again this quarter, prime net effective rents for both 5‑ and 10‑year leases also increased by 0.8%.

• The West End was the strongest performing submarket for the second consecutive quarter. Both headline and net effective rents (on 5‑ and 10‑year leases) rose by an average of 1.8% in Q1 2026, accelerating from 0.4% in Q4 2025.

• After remaining stable for the previous two quarters, Midtown recorded an increase in headline rents in Q1 2026. Headline and net effective rents (on 5‑ and 10‑year leases) rose by an average of 0.7%.

• The City of London also returned to positive quarterly growth, with headline rents increasing by an average of 0.5% after a flat Q4.

• Growth was particularly strong in the West End’s Mayfair and St James’s district, where headline rents increased by 5.9% between Q4 2025 and Q1 2026.

  • Finance and investment firms have been one of the largest drivers of demand in the district, with recent activity including Sona Asset Management’s pre let of c.31,000 sq ft at Pegasus Mayfair, continuing the trend of strong leasing from the sector in 2025.

• The West End’s Fitzrovia district also saw an increase in headline rents with a quarterly uplift of 2.4%.

  • One of central London’s largest lettings this quarter was completed in the district, marking Fitzrovia’s biggest deal in over four years. AI company Databricks Inc. pre let the entire 136,000 sq ft Network development, underscoring the district’s appeal to occupiers seeking high quality, well connected office space.

• In Midtown, rental growth was concentrated in the King’s Cross district. Headline rents increased by 2.8% from Q4 2025 to Q1 2026.

  • King’s Cross is emerging as a centre of excellence for the artificial intelligence (AI) sector. This trend is underpinned by good transport connections with research hubs outside London and proximity to London’s life sciences community and global technology companies including Google and Meta. The availability of high quality buildings, with good environmental credentials and large floorplates, which are increasingly difficult to find elsewhere in the Midtown sub-market, is also reinforcing the appeal of the area.

• Rental growth in the City of London was concentrated in the core banking and insurance district after being broadly flat since Q1 2025. The district recorded an uplift of 2.9% over the quarter.

  • Law firm Herbert Smith Freehills Kramer agreed a pre-let of 268,000 sq ft at 8 Exchange Square, Broadgate, which represents the largest City letting reported during Q1 2026. This letting highlights the robustness of demand from international professional services occupiers and reflects occupiers’ willingness to commit early to well specified schemes, ahead of rivals, in order to secure operationally suitable accommodation, capable of supporting future headcount growth, that falls within budget.

• Across all districts, rent‑free periods were unchanged, meaning movements in net effective rents directly reflected the uplifts in headline rents noted above.

Annual trends by submarket

• Annual headline rental growth across central London has softened further and averaged 2.5% for the year to Q1 2026, down from 3.1% in Q4 2025. Year-on-year growth has been decelerating from a peak of 5.6% in Q2 2025, as particularly strong growth between Q3 2024 and Q1 2025 in the City of London, South Bank and Midtown has dropped out of the calculation.

• The West End remains the principal driver of prime annual rental growth, accelerating to 6.1% in Q1 2026 from 5.9% in the year to Q4 2025.

• All other submarkets recorded stable or easing growth in prime headline rents. While the pace has moderated, this continues to reflect a positive backdrop for overall market performance and occupier demand.

• In Midtown, headline rents rose by 1.4% year on year, easing from a peak of 7.7% recorded in Q3 and Q4 2025.

• Headline rental growth has slowed to 1.1% in the City of London, down from a peak of 7.6% in Q4 2024.

• The non core submarkets have maintained annual rental growth of 2.2% in West London, largely concentrated in the White City district, and 1.8% in East London, primarily within Canary Wharf.

• A modest tightening in rent free periods in the City of London has lifted net effective rents marginally ahead of headline rental growth. Year on year, net effective rents have increased by 1.3% for 5 year leases and 1.4% for 10 year leases, reflecting stronger competition for well located Grade A space that has allowed landlords to scale back incentive packages.

Annual trends by district

• The three strongest districts for annual growth in net effective rents (assuming a 5-year lease) were all located in the West End. Mayfair and St James’s led the market for the second consecutive quarter, recording annual growth of 12.5%. Marylebone and Fitzrovia also recorded substantial growth, rising by 9.5% and 7.5%, respectively. This reflects an ongoing structural shortage of available prime space relative to demand, particularly for best-in-class buildings, which has put upward pressure on headline rents.

• Elsewhere in the West End, Victoria & Westminster also feature in the top 10 growth districts, with annual increases in net effective rents (assuming a 5-year lease) of 2.6%. This represents a marked slowdown from the peak of 19.4% recorded in Q2 2024.

  • The district has seen vacancy rates edge higher in recent quarters, reflecting several new or re-fitted developments coming forward that are fully available or with a significant proportion of uncommitted space.

• Annual change in net effective rents (assuming a 5-year lease) in the City of London’s banking and insurance district has eased to 3.9% from a high of 19.1% in Q1 and Q2 2025.

  • Although growth remains positive, supported by robust demand from international corporates and constrained availability, the recent slowdown reflects a more cautious market backdrop, with domestic economic policy and geopolitical uncertainty contributing to a more cautious approach to investment.

• The South Bank has also seen a deceleration in growth in net effective rents (assuming a 5-year lease) on an annual basis, slowing to 2.9% from its peak of 12.9% in Q2 2025.

  • Two major pre lets reported in Q1 2026 (BP’s c.198,000 sq ft at the Ink Building, Timber Square, and Quantexa’s c.51,000 sq ft at Delft) highlight the South Bank’s continued appeal to a diverse mix of occupiers. However, a significant proportion of the pipeline due to complete in 2026 and 2027 remains available (72.0% as at end of Q1 2026).

• Several districts, particularly across the non-core areas of East and West London and the City Fringe, have seen little change in leasing conditions over the past year, with limited transactional activity and a lack of new development resulting in broadly flat net effective rents. This highlights the concentration of demand in specific, higher performing locations and the degree of variation within submarkets.

Longer term trends

• The change in net effective rents (expressed as an index) since 2020 across central London’s submarkets is shown in Figure 4. After largely stabilising in Q4 2025, growth has begun to re-emerge, with momentum strengthening in the West End, and to a lesser degree in Midtown and the City of London, while East and West London have remained more subdued, as businesses continue to favour more central locations to reinforce recruitment strategies.

• As an average across all submarkets, net effective rents (5‑year lease) are now 21.5% above their pandemic‑era low. They also continue to outpace their pre‑pandemic peak, standing 11.7% higher.

• Most submarkets continue to record prime rental levels above previous peaks, with growth in headline rents acting as the primary driver of growth in net effective rents in the prime market segment. In the West End, net effective rents (assuming a 5‑year lease) are now 26.2% above their pre‑pandemic high, compared with 11.7% in Midtown and 10.9% in the City of London. By contrast, rents in East and West London remain moderately below their previous peaks, at 4.3% and 1.8% lower, respectively.

Outlook

Occupier demand

Looking ahead, prospects for prime office leasing activity appear encouraging, supported by a growing volume of space under offer and reports of large-scale requirements in the market. Demand, however, remains selective, with a clear preference for well-located, best-in-class buildings. Variation persists both between and within submarkets, for example between upper and lower floors in the City, and river-facing versus non-river-facing space in South Bank.

While activity strengthened towards the end of 2025 following greater clarity from the Autumn Budget, with an uptick in new enquiries and viewings, this momentum has not yet fully translated into completed transactions. More recently, geopolitical developments in the Middle East and their impact on energy costs and the global economy have created a more cautious occupier backdrop and delaying decision making.

Nevertheless, underlying demand drivers remain supportive. Sectors such as technology and AI continue to show strong appetite for prime, well-located space, particularly within established clusters including King’s Cross and other parts of the Midtown and West End submarkets. As such, while take-up may remain uneven in the near term, the outlook for prime assets remains positive, with demand expected to remain focused on high-quality, amenity-rich buildings.

Supply

Near-term supply remains constrained despite a steady flow of completions. Pre-letting activity has been strong, with 59.3% of developments due to complete across Q2 and Q3 2026 already committed (as at the end of Q1 2025). In addition, current vacancy rates are set to decline further reflecting the fact that terms have been agreed on some developments. More than 1.3m sq ft completed in Q1 2026, of which 83.1% had been let by quarter-end, leaving limited immediately available prime space.

Beyond 2026, completion volumes fall sharply, with a pronounced dip expected in early 2027 before a resumption in pipeline supply emerges from 2028. However, much of the longer-dated supply has yet to start on site and, combined with a decline in planning submissions and approvals in Q1 2026, suggests weaker pipeline replenishment towards the end of the decade. Rising build costs, partly linked to the conflict in Iran, alongside tighter planning regulations, may further delay projects and limit speculative development, leaving the medium-term pipeline more constrained than previously expected

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