Is London’s office market bouncing back? This is a question that has been on the lips of many international investors over the past 12 months.

Meaty deal: in December last year, 70 St Mary Axe, known as the ‘Can of Ham’, was sold for £331m

The UK capital is considered to be one of Europe’s most durable office markets – and a thriving occupier market has proven predictions of the death of the office post-Covid to be unfounded. And according to a recent report by property consultancy Knight Frank, London’s office investment market has now also turned a corner.

The report suggests the capital has managed to shrug off the impacts of Brexit and the pandemic better than many expected in recent years.

Sentiment is improving, according to Shabab Qadar, partner in the research team at Knight Frank, which shows that in 2025, when investment flows were still recovering, London reached £9.3bn. The year finished with a strong Q4 that alone saw £3.25bn of investment, and Knight Frank predicts that the annual total will rise to £12bn in 2026.

This optimism is supported by data from MSCI that shows that in the most recent economic window from 2023 to 2025, the capital drew an average of £6.9bn of investment per year, ahead of Paris at £6bn and far beyond Amsterdam, Berlin, Madrid and Milan, which each drew closer to £1bn annually. Over the next five years, London is projected to add around 186,000 office-based jobs, far more than Paris (51,500), Madrid (81,400), Berlin (33,500) or Amsterdam (30,600) and far above a virtually flat forecast for Frankfurt (3,800).

Big-ticket deals

A clear indicator of sentiment is the number of big-ticket items to exchange hands in the fourth quarter of 2025. In December, 70 St Mary Axe, commonly known as the ‘Can of Ham’, was sold by Nuveen to Capreon and Hayfin Capital Management for £331m (£1,049/sq ft), representing a net yield of 5.81%.

Also in December, the Fruit & Wool Exchange at 54-56 Brushfield Street was sold by M&G to Norges for an undisclosed fee – reportedly £315m (£983/sq ft), reflecting a 6% yield.

The West End in particular is viewed as a traditional safe haven for capital. As Qadar says: “The West End functions as London’s defensive core: a market where scarcity, brand value and global occupier demand have consistently translated into resilient income.

The best transactions in London are happening below the £100m mark
Shabab Qadar, Knight Frank

Prime yields are tighter at around 3.75%, reflecting the West End’s safe-haven characteristics and a track record of rental growth that has historically outpaced inflation.”

Knight Frank predicts that over the next five years, prime rents in the West End will grow by around 4.2% per year – but saw growth in 2025 well above predictions, at 15.6%.

According to Fons van Dorst, UK executive managing director at developer Edge, London remains a robust market for the office sector. “We’ve seen clear evidence that international institutional capital remains firmly interested,” he says. “Earlier this year, we recapitalised our asset in the West End, EDGE Shaftesbury, with backing from Sumitomo Mitsui Trust Bank and a consortium of Japanese equity investors, signalling a clear vote of confidence.”

High-quality space

But while the narrative around offices has shifted, strong investor activity and occupier demand both confirm that growth in the office sector is centred around quality of space, not just volume. What investors are looking to buy is very different depending on what is on offer, says Qadar.

He adds that larger deals are, in effect, transacting at a discount relative to yield value. “The best transactions in London at the moment are happening below the £100m mark,” he explains. “When you look at the implied yield, they’re often below the [average] of 5.25%. So this market has been characterised, really, by deals that are typical of driving the investment market – and now those larger assets trade at a yield discount.”

When looking at the longer-term trend, the City of London is still performing below its 10-year annual average turnover for investment. Data from consultancy Allsop shows the Square Mile hit £4.5bn in total traded assets in 2025, compared with more than £12bn in 2018.

However, prime City core rents are undoubtedly climbing – Knight Frank recorded a 7.9% annual increase in 2025. According to Bradley Baker, chief executive of developer CO-RE, there is rental growth, but not in the way the market normally adjusts to lower vacancy rates. “Usually, you see rents going up on a nice curve – it isn’t happening this time,” he says. “It’s going up in chunks; it’s going up by £5/sq ft at a time.”

We saw rent of £150/sq ft in one of the towers in the City the other week
James Abrahams, Allsop

Baker adds: “If you are a big occupier, there really aren’t many options available. The supply side is really on the floor over the next two to three years. So, somebody who’s looking at a development, if they have the right location, such as a riverfront or a very prime location, and the right spec, then they are going to be delivering a scheme into a supply chain where the vacancy rates haven’t been this low in a generation.”

One of the biggest obstacles to new development over the past decade has been the cost of building new schemes.

James Abrahams, partner – head of city investment and development at Allsop, says that because build costs haven’t come down, it has taken a certain amount of time for rents to catch up.

“We saw rent of £150/sq ft in one of the towers [in the City] the other week,” he adds. “If you look back to when 22 Bishopsgate was completed [in December 2020], tenants were paying mid-£70s. So rents have doubled.”

For prime grade-A space, new top rents may be achievable, but those rents aren’t being commanded everywhere, even across the City. The issue for investors and developers is that build costs are still relatively high. According to Abrahams, a rental level of more than £105/sq ft is needed “just to put a spade in the ground – and that is still a lot”.

CO-RE’s Baker believes that the current climate is likely to continue for the foreseeable future. “I think over the next two years, we will see a continuation of very low vacancy rates,” he says. “We will see rental increases, and we will see occupiers demonstrating
that if they want to attract robust people, they’ve got to have aspirational-quality space in the right locations. I think, inevitably, you might get to the stage further down the line when everybody sort of starts building at the same time. But I don’t see that happening any time soon.”

The current climate may suggest a first-mover advantage, with one particular transaction setting off an avalanche of other deals. When or whether that will happen is a question for the market, although investor Brookfield is currently in talks with private equity firm Castleforge over the sale of the Citypoint tower for around £455m.

“What investors need is a continuous churn [of offices], so that they can see the evidence of how comparable buildings are trading,” Qadar says. “That establishment of price, that price discovery, is what provides the lubrication to liquidity.”

For the moment, London’s office market appears primed for a revival. That revival may just need an investment spark.