London’s status as a global financial hub and a major contributor to the United Kingdom’s economy comes with a bustling office real estate sector. Unsurprisingly, banking and finance companies represent about
. Key locations include the West End, the City of London, and Canary Wharf. The West End is known for being London’s commercial and entertainment center, as well as
. The City of London is home to the London Stock Exchange and the headquarters of big banks, such as Bank of England, Barclays, HSBC, Lloyds, and many others. With its iconic skyline of high-rise office buildings, Canary Wharf is another noteworthy location attracting investors and occupiers.
Offices are still attractive to investors and developers
According to industry experts, London is the city with
the best development and investment prospects in Europe. Although the attractiveness of London remains undisputed, Brexit, the coronavirus pandemic, and the unfavorable economic climate have seriously affected the sector. In 2023, the investment value allocated to office real estate in London fell for the
third consecutive year, reflecting the decline in investor sentiment. Historically, net prime yields – an indicator of profitability – have
maintained levels below four percent. In 2023, the prime yield in London hit four percent in response to the higher risk and tighter lending environment.
Demand remains stagnant
Demand for office real estate in London plummeted in 2020 because of the coronavirus pandemic and hybrid work. Since then, the annual take-up
has increased but remains below the period before the pandemic. Take-up measures the floor space transacted during a specific period, including letings, pre-letings, sales, or pre-sales. Naturally, companies in the market for an office will go for the most attractive offer. That often includes new, modern offices that resonate with businesses’ sustainability targets and are attractive to employees. In the City of London, the overall vacancy rate stood at 9.1 percent in the fourth quarter of 2024, which was 7.7 percentage points
higher than for newly built offices. In the West End,
the gap was smaller but followed the same trend.
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