Record prices for the best towers and empty floors in the tired ones: the capital’s office market has split in two, and I have been doing the sums
London Office Rents Hit a Record as the Market Splits in Two
I work, most days, from a desk in N8 that cost forty pounds from a man in Muswell Hill. I mention this to establish my credentials as an observer of the London office market and not a participant in it. Because the numbers coming out of the Square Mile this year are not ones a person like me will ever pay.
According to Savills’ Central London office market report for the first quarter of 2026, the average prime rent in the City rose to 130.80 pounds per square foot. That was up 40 percent on the same quarter a year earlier and a new record, beating the previous quarter’s record of 105.26 pounds by nearly a quarter. The top rent achieved in the City was 160 pounds per square foot. In Soho a new high of 165 pounds was set.
To put that in domestic terms, at 130 pounds a square foot my box room would rent for more than my flat.
What Is Going On
The explanation is in one line of the same report. Demand remains, in its words, polarised in favour of premium-quality space. In one sector the firm tracks, 99 percent of the space taken was Grade A. Occupiers want the best buildings and almost nothing else.
Other research tells the same story from the supply side. A construction industry analysis published this week, drawing on Savills data, puts Grade A vacancy in London at just 2.2 percent and notes that average prime rents in the City passed 100 pounds per square foot for the first time in 2025. A headline rent of 145 pounds was achieved at one Bishopsgate tower.
Why Companies Pay It
I have asked myself why a business would pay double for a floor with a better lobby. The answer, as far as I can make out, has three parts.
The first is the office itself as an argument. Since the pandemic, employers have been trying to persuade staff to come in. A handsome building near a good station, with showers, a roof terrace and air that has been filtered within an inch of its life, is part of the pitch. A dim floor above a sandwich shop is not.
The second is that firms are taking less space and spending more on it. If half your people are in on any given day, you need fewer desks. The saving on area funds the upgrade in quality.
The third is environmental rules. Large companies have made commitments on energy use and carbon. Old buildings do not meet them. New ones do.
Who Is Paying
The names in the research are law firms, financial houses and technology companies. Businesses, in other words, for whom rent is a small line next to salaries. If you are paying a partner several hundred thousand pounds, the cost of the square footage she sits on is a rounding error. Keeping her is not.
The Other Market
Here is the part that does not make the brochures. If the best 2 percent is full and getting dearer, what about everything else?
London has an enormous stock of offices built between the 1960s and the 1990s. Many are in decent locations and poor condition. They have low ceilings, tired lifts and energy ratings that will soon make them difficult to let at all. Their owners face a choice between an expensive refurbishment, a conversion to something else, or watching the building empty.
So we have record rents and, a few streets away, whole floors nobody wants. It is one city and two markets.
Why It Matters Beyond the City
I can hear the objection from my neighbours. Why should anyone in Haringey care what a hedge fund pays for a view?
A few reasons. Offices are where a large share of London’s jobs sit, and where they sit shapes transport, lunch trade and everything else. Empty offices are a waste of land in a city short of homes, and the argument about converting them to flats is live in every borough. Business rates on commercial property help pay for local services. And pension funds, possibly including yours, own a great deal of this property. If secondary offices lose value, somebody’s retirement pot feels it.
The Cautious View
I do not want to get carried away. Averages for “prime” rents are driven by a small number of deals in trophy buildings. A 40 percent jump in a year partly reflects which buildings happened to let that quarter. It does not mean every landlord in EC2 has put the rent up by 40 percent. The same report shows the average Grade A rent for the City at around 80 pounds, a good deal lower than the prime figure.
And the economy is not exactly roaring. Borrowing costs are high and business confidence has been soft. Markets that hit records can also fall.
What I Would Watch
Three things. Whether the next round of quarterly figures holds the level or slips. What happens to the unloved buildings: refurbishment, conversion or decay. And whether small firms, who cannot pay tower prices, are being pushed out of central London altogether. That last would be a real loss. Cities need the two-person outfit above the dry cleaner as well as the bank in the sky.
From My Desk
For now I shall remain in N8, where the rent on my working space is included in the mortgage and the amenities consist of a kettle and a cat. The view is of a privet hedge. Nobody has offered me 160 pounds a square foot for it.
Lighter Reading
If you prefer your office news with jokes, The London Prat has British satirical news on office life and London satirical news about the Square Mile. You will find my business notebook there too. Bohiney Magazine covers the American cubicle.
SOURCE: https://bohiney.com/