London’s office market in 2026

London enters 2026 with tightening supply, early occupier engagement, and an increasing trend towards pre-lets. Declining levels of immediately available new and refitted grade A space across the West End, Midtown, South Bank, and the City of London are constraining choice and prompting footloose tenants to bring forward their property searches.

A rising share of office requirements is now being met through pre-let agreements on schemes under construction or refurbishment as footloose occupiers compete to secure operationally suitable accommodation that falls within budget, ahead of rivals. As this trend continues, the volume of uncommitted pipeline space reaching the market is expected to shrink further, a trend that is unlikely to be reversed until the end of the decade when the current wave of new developments will reach completion and provide a better balance between supply and demand.

Occupier demand is likely to remain subdued in early 2026, amid continuing uncertainty linked to US trade policy and a weaker domestic economy, before strengthening during the second half of the year as the positive effects of declining US interest rates begin to filter through the global economy. This should lead to increased job creation – especially in the financial and business services sectors – in London-based jobs which should translate in to increasing demand for office space. We also expect London’s growing Artificial Intelligence sector to become an increasingly important source of take-up during the next 12 – 18 months, underpinned by the UK’s position as a centre of excellence in the sector.

Rental conditions are set to remain highly polarised. In the super-prime West End – the Mayfair and St James’s districts, we except acute shortages of best-in-class space to maintain upward pressure on rents. Across the wider central London markets, rents for new and refurbished grade A space are likely to remain stable during the first half of 2026 before growth re-emerges during the second half, as demand strengthens and availability continues to contract.

Excluding the super-prime areas of the West End where rental growth may well be higher, by the end of 2026 rents for well-located mid-rise grade A assets are expected to show rental uplift of between 2.5% and 5%, while lower-quality buildings with poor sustainability credentials may see rents remain flat or soften further. We expect rent free period incentives for best-in-class grade A space to remain broadly stable throughout the year as landlords focus their attention on raising headline rents to flatter investment values, albeit there may be some minor contraction in rent free periods in parts of the West End and Midtown sub-markets where vacancy rates are particularly low.

Flexible workspace is well placed to maintain a resilient growth trajectory, driven by start-ups and established occupiers seeking agility. However, the increasing trend of traditional landlords offering managed office accommodation may exert pressure on serviced office providers.

On the investment side, we expect yields to continue their gentle downward trend as investors rebalance portfolios and sentiment slowly improves, with opportunities emerging across core, core-plus, and value-add strategies. Some secondary assets with mid-term WAULTs may, however, experience further outward movement as pricing continues to adjust.