Grade A space near a decent coffee shop commands a premium. Everything else is being quietly reconsidered

Walk through the City on a Tuesday afternoon and the divide is visible from the pavement: certain buildings, newly refurbished, well-located, close to decent food options, are running near capacity, while others, older stock, less convenient locations, sit with entire floors visibly under-occupied. London’s office market hasn’t simply shrunk since hybrid work took hold, it has bifurcated, and the gap between the winning and losing categories of space has widened into something closer to two entirely separate markets operating under one broad label.

A Specific Building Worth Naming as an Example

One recently refurbished building near Liverpool Street, converted from a fairly ordinary 1990s office block into a space with a rooftop terrace, an on-site café, and considerably improved natural light throughout, went from struggling to attract tenants at a heavily discounted rate to fully let within eighteen months of completing its refurbishment, at rents meaningfully above what the building commanded before the work began. The property’s agent described the transformation as proof that the underlying bones of a building matter less than what’s actually done with them, a lesson landlords holding similarly positioned but unrefurbished stock are increasingly taking seriously as they weigh whether to invest or continue watching occupancy decline.

What’s Actually Driving the Split

Occupiers making real estate decisions post-pandemic have converged on a fairly consistent logic, if employees are being asked to commute in rather than work from home, the office itself needs to justify that commute through genuine quality, natural light, decent amenities, proximity to things worth walking to at lunch, rather than simply providing a desk. That shift has turned amenity-rich, well-located Grade A space into something closer to a premium, actively competed-for asset, while older, amenity-poor buildings in less convenient locations face a genuinely difficult repositioning question landlords are only beginning to grapple with seriously.

What Employees Themselves Are Actually Saying

Surveys of London office workers conducted by several commercial property consultancies consistently find employees citing building quality and amenities as a genuine, significant factor in how willingly they comply with return-to-office expectations, more so than many employers initially assumed when hybrid work policies were first being drafted. Workers report a noticeably different attitude toward commuting into a bright, well-equipped space with decent coffee and natural light than toward a dated, poorly maintained building offering little beyond a desk, a distinction that has given HR and workplace strategy teams genuine leverage in internal conversations about capital investment in office quality that might otherwise have been treated as a low priority. Several workplace strategy consultants now explicitly advise clients to treat office quality as a retention and recruitment tool in its own right, not merely a cost line, a framing that has helped some finance teams justify the kind of refurbishment spending that would have been a much harder sell purely on productivity grounds alone.

The Numbers Behind the Divide

Commercial property analysts tracking London’s office market report vacancy rates for prime, well-located space running considerably below the market average, while secondary stock, older buildings requiring meaningful capital investment to compete, carries vacancy well above it, a gap wide enough that treating “London office vacancy” as a single meaningful average increasingly obscures more than it reveals about the market’s actual, highly uneven texture.

What Happens to the Losing Half of the Market

Landlords holding secondary stock face a narrowing set of realistic options: invest significant capital in genuine refurbishment to compete for the shrinking pool of occupiers still willing to pay for quality office space, convert to residential or alternative use entirely, a process complicated in London by planning permission hurdles and conversion costs that don’t pencil out for every building, or accept declining rents and occupancy as the building’s new, less profitable reality. None of these options is straightforward, and the sheer volume of secondary office stock across London means the market likely can’t absorb conversion or refurbishment fast enough to resolve the split within the next several years.

What This Means for Businesses Looking to Lease

For businesses currently negotiating office leases, the bifurcated market has created genuine negotiating leverage on secondary space, landlords eager to fill under-occupied buildings are offering meaningfully more favourable terms, longer rent-free periods, greater fit-out contributions, than the market offered even three years ago. The tradeoff is real: cheaper secondary space often comes with the exact amenity and location shortcomings that made it secondary in the first place, meaning businesses choosing on price alone risk struggling with their own return-to-office push if the space itself doesn’t give employees a reason to actually want to come in.

Where the Smart Money Is Actually Going

Property investors and developers with capital to deploy are increasingly concentrating it specifically in the refurbishment and repositioning of well-located secondary stock, betting that a building’s fundamentals, location, structural quality, can be upgraded into prime-adjacent status through targeted investment, rather than spreading capital thinly across the broader secondary market. That concentration itself reinforces the split, well-positioned secondary buildings get the investment needed to cross into the winning category, while genuinely poorly located stock gets left further behind with diminishing prospects of ever attracting that same investment.

Continuing coverage of London’s commercial property market is tracked at prat.uk.

SOURCE: https://prat.uk