The growing divide in London Offices

Central London’s office market continues to present something of a paradox

Prime occupational markets remain resilient, with rental growth continuing across the best locations a demand increasingly focused on high-quality, ESG-compliant space. But from an investment perspectiv is more nuanced. While pricing has broadly stabilised, the capital required to keep buildings relevant is increasingly important consideration. 

In the West End, prime rents in Mayfair and St James’s have exceeded £200/sq ft, with a handful of dea to be under offer for significantly in excess of this, with grade-A supply remaining constrained. The offi also playing a greater role in attracting and retaining employees, reinforcing the focus on quality and 

Higher financing costs, construction costs, refurbishment costs and evolving Energy Performance Certifi and environmental, social and governance (ESG) requirements are all influencing investment decisions 

Although the regulatory landscape around ESG continues to evolve, occupier expectations are arguabl more quickly. Businesses increasingly want to occupy buildings with strong sustainability credentials, meaning assets that fall b becoming less competitive, regardless of the direction of future legislation. However, focusing solely on environmental factors o critical driver of occupier demand: the ‘S’ in ESG.

Also, many firms today expect fully fitted spaces, to eliminate significant upfront capital expenditure at the start of a lease, allo focus entirely on their core business. Consequently, plug-and-play demand is no longer confined to small suites; it is now frequ the 10,000 sq ft bracket, where occupiers expect large but human-centric environments that seamlessly integrate health, acces robust end-of-trip facilities. 

The fundamentals also remain key: location, layout, floorplates and overall usability continue to influence both rental performa investment demand. Specification can be improved, but the underlying characteristics of a building are often harder to change, an important consideration before committing further capital.

Repositioning opportunities

These factors are creating a clearer distinction between buildings capable of supporting further investment, whether for refurb repurposing, and those where the economics are more challenging. For some investors, this is also creating opportunities to re located, older stock and deliver the quality of accommodation occupiers are seeking. 

The result is perhaps a more complex market than the traditional prime-versus-secondary narrative suggests. Strong rents do n automatically mean strongest values, and increasingly, the question is not simply what a building can rent for, but what ongoin required to get and keep the rent there.

With grade-A supply remaining limited, the next question is where occupier demand goes from here: will businesses continue t increasingly expensive prime space or will this pressure begin to push more demand into London’s wider submarkets? 

However, even the traditional terminology of ‘grade A’ may no longer be fit for purpose. What we are witnessing is the consolida strict, one-tier market where only the absolute best in quality is demanded. The market has bifurcated so sharply that it is now easier to let a flagship asset commanding £200/sq ft than it is to find a tenant for secondary space at £20/sq ft.

This article was first published on 20th October 2026 in Property Week To view the article, click here.