Thursday, 3 September 2026
London’s office recovery is becoming increasingly uneven. While headline leasing figures suggest that demand across the capital is improving, the strongest rental growth is being concentrated within a remarkably small collection of high-quality buildings. Nowhere is this more visible than in the West End, where Mayfair and St James’s are increasingly operating at price levels far removed from much of the wider London office market.
Second-quarter 2026 leasing data reinforces the scale of the divergence. Central London recorded approximately 2.5–2.8 million sq ft of office take-up during the quarter, depending on the methodology used, with activity running around or above longer-term averages. The West End accounted for approximately 1.25 million sq ft and performed particularly strongly compared with its historical quarterly levels.
More significant than the volume of transactions is the type of accommodation being selected. Around three quarters of Central London leasing during the quarter involved Grade A buildings. The figures suggest that companies have not abandoned offices, but they have become considerably more selective about the buildings they are prepared to occupy.
The consequence is an increasingly severe shortage at the top of the market. By the end of the second quarter, only around 124,000 sq ft of new Grade A accommodation was immediately available across Mayfair, St James’s and Soho combined. For companies seeking premium space in these locations, the number of realistic options has therefore become extremely limited.
That scarcity is translating directly into rents.
Prime Mayfair and St James’s offices were being valued at around £200 per sq ft during the second quarter according to some market measures, approximately 18% higher than a year earlier. Individual transactions have reached similar levels, while exceptional buildings have occasionally exceeded £200 per sq ft.
These figures should not be interpreted as the normal rent for every West End office. They instead reveal the emergence of a relatively small super-premium segment in which location, building quality and scarcity can command prices considerably above the wider market.
The comparison with the City is striking. Prime City office rents have been running at roughly half the levels achieved by the most expensive Mayfair and St James’s properties. The difference cannot be explained by building quality alone. The West End’s most exclusive districts offer a combination of limited development opportunities, prestige, amenities and proximity to wealthy residential neighbourhoods that is difficult to reproduce elsewhere.
Supply constraints are reinforcing this advantage. Vacancy across Mayfair and St James’s was around 4.4% at the end of the second quarter, below the area’s longer-term average. More importantly, a significant proportion of the buildings expected to complete over the next several years have already attracted occupiers.
Around half of Mayfair’s development pipeline through 2029 was already committed or subject to negotiations by the middle of 2026. In St James’s, the proportion was considerably higher at approximately three quarters. Companies requiring larger quantities of premium space are consequently having to make decisions well before buildings are completed.
This behaviour is particularly important for investors because it suggests that rental growth is being supported by structural scarcity rather than simply a short-term increase in leasing activity.
There is very little land available for major office development in Mayfair and St James’s. Planning constraints, heritage considerations, existing ownership structures and the physical character of these districts restrict the amount of new space that can be introduced. Even when new or extensively refurbished buildings are delivered, they represent relatively small additions to the overall market.
Soho is increasingly participating in the same trend, although at lower rental levels. Its appeal has strengthened among technology, media and creative companies that value access to restaurants, entertainment, transport and London’s broader cultural economy. The rapid development of artificial intelligence businesses has added another source of demand for well-located modern offices.
Technology companies have been particularly focused on Grade A accommodation. Rather than simply looking for the lowest occupancy cost, many businesses appear prepared to pay more for buildings capable of supporting recruitment, collaboration and employee retention.
This helps explain one of the apparent contradictions of the post-pandemic office market. Hybrid working was initially expected to weaken landlords’ pricing power because companies would require less space. In parts of the West End, the opposite effect may be emerging.
Companies can reduce the amount of space they occupy while allocating more money to each square foot. A business moving from a larger secondary office into a smaller premium building can accept a significantly higher headline rent without increasing its total property expenditure proportionately.
The office consequently becomes less about accommodating every employee every day and more about providing a location capable of attracting people when they do come together.
Marylebone is also benefiting from this shift, although it should not yet be placed in the same rental category as Mayfair and St James’s. Supply is relatively constrained and good buildings can command strong rents, but Grade A pricing has generally remained below the levels achieved in London’s most expensive office districts.
Its importance may instead lie in what happens next. As companies struggle to find suitable accommodation in Mayfair, St James’s and Soho, neighbouring districts with strong transport connections and attractive environments could capture displaced demand. Marylebone is well positioned to benefit from that movement.
The greatest risk in interpreting the West End market is assuming that rising prime rents are lifting every building equally.
They are not.
The divide between premium and secondary offices is becoming increasingly visible. Market evidence indicates that prime Central London office values have risen over the past year while weaker assets have continued to lose value. The difference is increasingly determined by the amount of capital required to make a building competitive.
Older offices may share the same Mayfair, Soho or Marylebone address as successful premium properties but face an entirely different leasing environment. Poor energy performance, dated mechanical systems, inefficient layouts, inadequate amenities or limited outdoor space can make them significantly less attractive to occupiers.
This means geography alone is becoming a less reliable indicator of office value.
A high-quality building in an exceptional location can attract intense competition and record rents, while an outdated property only a few streets away may require substantial incentives and refurbishment expenditure to secure tenants.
That distinction is beginning to influence investment pricing as well as leasing.
Investors are increasingly required to calculate not simply the rent currently being generated but the capital expenditure necessary to maintain the building’s position over the next leasing cycle. Properties requiring extensive upgrades must be acquired at prices capable of supporting those costs.
The result is effectively the development of several London office markets operating simultaneously.
At the top is a small collection of exceptional buildings where supply is scarce, tenant demand remains deep and rents can approach or exceed £200 per sq ft. Below this sits the broader Grade A market, where occupiers continue to demonstrate a strong preference for modern, efficient accommodation. Further down are secondary properties facing greater leasing competition and potentially significant refurbishment requirements.
The West End illustrates this fragmentation more clearly than almost anywhere else in London.
Mayfair and St James’s are increasingly behaving like a specialist premium market where scarcity and prestige can outweigh conventional rental benchmarks. Soho is moving closer to that dynamic as technology and creative businesses compete for high-quality space. Marylebone provides another potential beneficiary as occupiers search beyond the most supply-constrained districts.
For investors, the implications extend beyond headline rental growth. Buildings capable of satisfying increasingly demanding occupiers could continue to capture a disproportionate share of leasing demand and rental increases. Secondary properties, meanwhile, may require substantially greater investment merely to prevent their competitive position from deteriorating.
London’s office market is therefore not experiencing a uniform recovery. It is becoming increasingly segmented according to quality, location and the amount of capital required to remain relevant.
The extraordinary rents being achieved at the top of the West End should consequently be viewed less as evidence that every London office is becoming more valuable and more as evidence of how scarce the best buildings have become.
The investment question is no longer simply whether West End rents will continue rising. It is whether the widening gap between exceptional and ordinary offices becomes a permanent feature of London’s property market — and how much investors should be prepared to pay for buildings capable of remaining on the right side of that divide.
Source: © CIJ.World UK Research & Analysis Team
