Central London office investment climbed 45% year-on-year in 2025, rising from £4.79bn to £6.95bn, driven by the return-to-office wave sweeping major firms across finance, law and technology.
The numbers look impressive on paper. West End prime rents have now reached £182.50 per square foot — an all-time high — and Grade A buildings in core postcodes are being snapped up before they even open their doors.
But that headline figure conceals something uncomfortable about the shape of London’s commercial property market in 2026.
Transaction volumes across the office sector actually fell 6.9%, suggesting investors are concentrating their activity in premium space and walking away from everything else.
Older buildings, particularly in Docklands and outer West London, are sitting with vacancy rates above 12%, and landlords are offering increasingly desperate rent-free incentives just to fill the floors.
The structural driver pushing older stock into obsolescence is environmental regulation. More than 80% of UK office buildings currently fail to meet the EPC B rating required by 2030 under incoming government energy efficiency rules, meaning a retrofit wave of enormous scale is approaching.
For London’s smaller businesses, the consequence is increasingly being priced out of desirable zones entirely, pushed toward outer boroughs where transport connections are weaker and talent harder to attract.
Energy costs are compounding the squeeze. City of London businesses collectively spend an estimated £196 million per year on energy, and the war in Iran has pushed commercial utility costs sharply higher, with the British Chambers of Commerce reporting that 52% of firms are now under pressure to raise prices because of their energy bills.
The fundamental paradox is that London is simultaneously one of the world’s most attractive cities for Business investment and one of the most expensive and difficult places to actually run a small or mid-sized company in.
That tension — record rents at the top, accelerating obsolescence at the bottom — is the defining economic reality facing the capital’s commercial property market this spring.