Central London office market shows resilience despite economic headwinds

On 5 March 2026, the BCO NextGen London & South East committee, in partnership with Savills, hosted a webinar exploring the forces shaping Central London’s office market. The discussion highlighted a market that remains resilient despite economic pressures, with occupiers prioritising high-quality, well-connected office space to attract talent and drive productivity.

The speaker panel, Victoria Bajela, Andrew Barnes, and Hunter Booth from Savills, identified two key market drivers: the ongoing “flight to quality” and the rapid emergence of artificial intelligence companies as new occupiers.

Hybrid working has largely stabilised around a four-day office model, said the panellists but fast-growing tech and AI firms are rapidly moving from flexible space into full-scale headquarters, reinforcing London’s status as a global innovation hub.

Cost pressures shaping occupier decisions

Rising fit-out costs are reshaping occupier behaviour, said Savills, with average workplace fit-outs now around £250 per sq ft, with premium schemes exceeding £500 per sq ft. Fitted offices are increasingly attractive for occupiers in the 5,000–20,000 sq ft range, reducing upfront capital expenditure and accelerating move-in timelines.

In 2025, roughly 60% of businesses evaluating “stay versus go” opted to renew, reflecting both cost pressures and uncertainty over future supply.

Market stability amid uncertainty

While UK businesses face weak growth, high borrowing costs, and geopolitical uncertainty, Central London’s leasing market has remained stable. Occupiers are increasingly comfortable operating in a post-pandemic environment, and London’s global business role continues to underpin office demand, supporting talent, innovation, and international connectivity.

AI firms are already a notable source of new demand, scaling quickly from small flexible offices to large headquarters. Meanwhile, the “flight to quality” continues. Last year around 77% of office take-up involved newly built or refurbished space, reflecting strong preferences for modern, sustainable, amenity-rich buildings. Weekly office occupancy sits about 10% below pre-pandemic levels, with many organisations adopting a four-day in-office model.

Constrained development pipeline

The development pipeline is tightening. While projects completing in 2025–26 will add supply, activity for 2027–29 remains below historical norms as construction costs and expensive debt weigh on new starts. Vacancy rates are extremely low in core locations, around 3.6% in the West End core and 2.6% in City tower buildings, supporting strong rental growth. Prime West End rents now average £170 per sq ft, with some deals exceeding £200 per sq ft in Mayfair and St James’s.

Transport access remains critical for occupiers, with the Elizabeth Line heavily influencing location choice. Employees also prioritise reliable technology, commute time, natural light, and functional workplace design, underlining the increasing importance of convenience and quality in modern offices.

Positive long-term outlook

Despite current economic pressures, the long-term outlook for Central London remains robust. The city leads global peers in projected employment growth, particularly in technology, science, and professional services. As occupiers adapt to rising costs and evolving workplace expectations, Central London continues to attract international companies and maintain its status as a resilient, high-value office market.

The discussion was chaired by Poppy Taylor, associate partner at Rubix and member of the BCO NextGen London & SE committee.

You can watch the webinar in full here