London’s Office Market has Found its Footing, Now it’s About Timing the Climb

Posted by Colliers on 28th August 2025 -

Following two years of recalibration, London’s office market is not just stabilising. For the first time since the pandemic disrupted demand and unsettled investor sentiment, we are seeing signs of momentum that appear directional rather than purely cyclical.

In Q2 2025, take-up reached 3.2 million sq ft, the highest figure in over 18 months and 17% above the 10-year average. More significantly, this activity has been driven by large floorplates, high-quality space, and pre-let transactions. This suggests the market is shifting away from questions about the existence of demand, and instead focusing on the availability of suitable space, making timing and product selection increasingly important for both occupiers and investors.

The preference for quality remains consistent. Grade A space accounted for 81% of all deals in Q2. In the West End, submarkets such as Mayfair and St James’s are recording new Grade A vacancy rates of just 0.6%. This is not a reflection of surging demand alone, but also a clear sign of limited new supply. Developers have brought less space to these locations, and with only 170,000 sq ft due for delivery across Mayfair and St James’s through the rest of 2025, constraints are expected to persist.

In the City, the average Grade A deal size rose from 11,366 sq ft to over 20,000 sq ft quarter-on-quarter. Two major transactions, Squarepoint’s 404,000 sq ft pre-let at 65 Gresham Street and State Street Bank’s 194,000 sq ft acquisition at 100 New Bridge Street, together made up over one-third of total take-up. These deals highlight a return to longer-term strategic leasing/purchasing decisions by occupiers seeking to secure high-quality central London space.

Investor sentiment is gradually aligning with these market dynamics. Q2 investment volumes totalled £1.85 billion down 20% on Q1, but 17% ahead of the same period in 2024. The West End has now seen three consecutive quarters where transaction volumes have exceeded £1 billion, underscoring continued confidence in core London assets. Prime yields have remained stable at 4.25% in the West End and 5.25% in the City. Overseas buyers who account for 76% of investment so far this year continue to take long positions, indicating that many believe pricing has now bottomed out and that market fundamentals support long-term growth.