London faces a shortage of premium commercial property
London's prime office market is experiencing a surge in demand for top-tier, future-ready workspaces, as companies adapt to hybrid working while maintaining culture and attracting talent. This shift is accompanied by a scarcity of Grade A office space, resulting in rising rents, particularly in sought-after locations such as the West End.
In Q1 2025, office take-up in London reached 2.13 million sq ft, slightly above the 10-year average, signalling a robust resurgence. However, the current Central London market has around 23 million sq ft of available office space, yet much of this space is not Grade A or does not meet modern sustainability and design standards. Vacancy rates in Central London decreased slightly but remain elevated at 8.2% overall, with the West End having a notably lower vacancy of around 7.4%.
Prime rents reflect this scarcity and demand imbalance. West End rents rose to £160 per sq ft in Q1 2025, a 7% increase quarter-on-quarter and a 14% year-on-year increase. Meanwhile, City Core rents remain robust at around £87.50 per sq ft. This price growth underscores how premium tenants are willing to pay a premium for location, quality, and amenities.
The trend towards lease renewals over relocations (60% renewals) indicates tenants' limited alternatives and preference to remain in top-tier spaces despite rising costs. This flight to quality is further evidenced by major acquisitions by sovereign wealth funds, such as Norges Bank Investment Management's two West End acquisitions and Abu Dhabi's Modon's investment in Covent Garden.
Looking ahead, the future outlook for London’s prime office market is one of continued scarcity-driven strength. With 16.2 million sq ft of new office space under construction, much of it aiming to be premium and ESG-compliant, the market is transitioning towards better-quality assets to meet evolving occupier demands. The trend towards hybrid working reinforces the need for spaces that support culture, collaboration, and talent retention, pushing demand towards future-ready offices.
In summary, London's prime office market is entering a new phase marked by structural scarcity and strong demand for top-tier office space. With only 5.91m sq ft of Grade A office space, characterised by prime location, ESG compliance, and modern infrastructure, scheduled for delivery post-2025, the demand for prime office space in London is set to significantly outstrip supply. Those who act now and secure premium assets aligned with evolving workplace trends will be best positioned to capture long-term upside.
Byron Baciocchi, founder and CEO at Unica Capital, recently acquired 2-4 Cork Street, located in Mayfair, as a reflection of this thesis. The window to secure top-tier assets is narrowing, as the market evolves to align with this trend. The latest London Moves 2025 report from Cushman & Wakefield reveals that 60% of all tenant decisions were renewals, a record high, reflecting a growing scarcity of desirable alternatives. This trend places even more pressure on the limited supply of ESG-compliant, design-forward space.
Finance experts predict an increase in investing in London's prime office market due to the scarcity of Grade A offices that meet modern standards. The trend of lease renewals over relocations suggests a high demand for top-tier real-estate, supporting the notion that those who secure premium assets aligned with evolving workplace trends will likely benefit from long-term growth in business.
