New analysis from global commercial real estate advisor Avison Young shows that, of the 5.9m sq ft of Central London office developments due to be delivered in 2026, 43% of space has been pre-let, with occupiers holding out for Grade A space in a supply-constrained market.
Despite a slowdown in the market in the second half of last year, demand levels reached 10.4m sq ft in 2025, sitting 6% ahead of the 10-year average of 9.8m sq ft. Large corporates were among the most active, with 14 deals for spaces in excess of 100,000 sq ft (up from 9 in 2024) and 40 deals for spaces in excess of 50,000 sq ft (up from 32 in 2024).
Significant deals in Q4 2025 contributing to the increase in activity include Visa’s 190,000 sq ft letting at 1 Canada Square; Gibson Dunn taking 148,000 sq ft at 1 Exchange Square; and Ares Management signing up for a 124,000 sq ft space at One Hanover Street.
The firm’s analysis also shows that, over the last three years, deals over 50,000 sq ft that achieved in excess of £80 per sq ft account for over half of all deals within this size band, up on 23% over the previous three-year period (2020-2022).
A large proportion of those deals were higher quality new developments, highlighting the continuing trend that corporate occupiers are increasingly willing to pay more if it means securing best-in-class space, which continues to be in short supply.
Development completions totalled 8.2m sq ft in 2025, accounting for the highest level post-COVID; however, vacancy remains on a downward trend, having fallen to 6.6% in Q4, down on 6.8% the previous quarter.
Overall in 2025, demand remained focused in the City Core, accounting for 40% of all take-up, while fringe submarkets revealed a mixed picture. In East London, take-up increased 179%, driven by activity in Canary Wharf, while the Tech Belt saw a 33% fall in demand.
Meanwhile, investment volumes reached £2.9bn in Q4, up significantly on Q3 (£806m) and ahead of the 10-year average of £2.8bn, bringing the annual volume to £8.5bn, up from £3.5bn in 2024.
2025 volumes were bolstered significantly by three £100m+ Norges Bank Investment Management transactions totalling in excess of £1bn, including the purchase of Shaftesbury Capital’s Covent Garden Estate for £570m; the acquisition of 25% interest in Grosvenor’s Mayfair portfolio for just under £306m; and, more recently, the purchase of the Fruit & Wool Exchange for £285m.
Investor confidence returned strongly in 2025, with 21 large transactions (£100m+) compared to 9 in the previous year. Domestic investors made up 33% of acquisitions, followed by European investors with a 23% share, an increase from 10% in 2024. Asian investors also increased their share from 4% in 2024 to 7% in 2025, with Japanese investors the most active.
James Walker, Principal and Head of London Office Leasing at Avison Young, said:
“Concerns around the Autumn Budget, coupled with the higher cost of moving and a lack of available Grade A space, have led many occupiers to regear and stay put, with several high-profile companies opting to invest in the buildings they already occupy. In many cases, they simply haven’t had the option to secure the space they need within the timeframe required.
“With supply extremely tight, we are seeing a clear premium being paid for quality and scale. The challenge is that without new development starts, the supply issue will only intensify. This raises a fundamental question for the market: what level of rents is required to stimulate construction and bring more schemes forward, and when will construction costs begin to ease?
“Looking ahead to 2026, we expect demand to remain concentrated in the City Core, gradually filtering out into well-connected fringe locations as occupiers continue to plan further ahead, eyeing up future stock that best meets their needs.”
Dominic Amey, Principal, London Investment at Avison Young, added:
“As we enter 2026, London’s office market is being shaped by a combination of constrained supply, resilient occupier demand and improving investor sentiment. With Grade A availability tightening further, particularly in the City Core, we expect rental growth to remain supported and investor focus to sharpen on markets and assets that can deliver scale, quality and long-term income security.
“If the broader macro environment remains relatively stable, we anticipate investment volumes moving closer to long-term averages, underpinned by continued interest from European capital and a growing presence from Japanese, Singaporean and other Asian investors seeking diversification. Against a backdrop of limited new development starts, the fundamentals for well-located, best-in-class offices remain compelling.”
Read Avison Young’s Central London Office Analysis for Q4 2025 in full here.