There are currently two things happening in the London office market that seem contradictory: record rents and record vacancies are being reported at the same time.
However, this paradox reflects the fact that the market has been split in two, creating two opportunities for landlords willing to invest.
Imagine two office buildings, within a mile of each other, in central London. One of them is fully rented and the landlord is making competitive bids on every available floor. The other is the loss of tenants, with incentives and rent-free periods galore.
Many investors are turning to specialized financing
To understand this phenomenon, you need to start by examining rental prices. According to data from SHB Real Estate, the market average rental price for Grade A City was £80.43 per square meter in the first quarter of 2026, up 15% year on year, while Grade A space in the City Core starts from around £70 and in the wider West End from £45. For landlords and investors operating below these price levels, marginal markets such as Canary Wharf offer Class A unsuitable space from £40 to £65, while Stratford is in the £35 to £45 range.
As you move further away from central London, vacancy rates start to increase rapidly and you don’t even have to travel far. Hammersmith has a vacancy rate of 22% and Vauxhall has a vacancy rate of 18%. A large part of this consists of outdated shares.
Well-connected locations where shares can still fetch meaningful rents (without competing at City Core prices) are increasingly gaining interest. This is where the more accessible side of the possibilities lies and where user demand is growing.
Some lenders are even ‘poaching’ into parts of the market with a clear competitive edge
Much more than just an overhead where cost savings are prioritized, leading companies need to attract top talent and therefore demand more floor space (despite the price tag) to create an environment where people want to come.
Fierce competition
With rental growth for offices in central London rising (6.3% per annum and on an upward trend), strong opportunities exist for landlords looking to capitalize on the high demand for prime office space. Potential owner-occupiers with significant resources also compete fiercely for prime Class A shares.
For older properties, the proposed 2031 Energy Performance Certificate B deadline for privately rented commercial buildings over 1,000 square meters is approaching, and landlords of secondary office premises face a difficult decision. Are they investing heavily to boost the stock or are they starting to think about an exit (absorbing the value losses they have recently suffered)? The secondary market is not an easy market.
Leading companies need to attract top talent and therefore demand more floor space
As competition for high-quality office inventory increases, it also means more lenders competing for loans on these assets. This is good news for people looking to buy, as many lenders have had to become a bit more generous with their criteria to get the deal on their books. Some lenders are even ‘nicking’ into areas of the market with a clear competitive edge on at least one key criterion.
As demand for modernized offices with greater sustainability features grows, many investors are turning to specialist financings for large loans and commercial mortgages that align with their commercial strategies in acquiring best-in-class assets. The same applies to owner-occupiers.
Specialist finance brokers also have the added benefit of access to a range of lenders, each of whom may have a product suitable for different buyer profiles. They provide advice on obtaining a financing package that suits the investor’s needs, in a way that a commercial mortgage from a major lender cannot.
Lower rates
With yields stabilizing, mortgage rates lower than in recent years and confidence returning, it is encouraging for those with the resources to compete and buy top quality assets (who likely already have strong tenants). For these investors, there is a plethora of specialist commercial mortgages available, while those who need to make ends meet quickly often turn to short-term financing with a planned commercial exit.
To understand this phenomenon, you need to start by examining rental prices
For those willing to take a risk and increase secondary office inventory, an opportunity awaits. There is a wide range of secondary shares and they are relatively cheap; and with sufficient modernization, these transformed properties have strong future tenants waiting in the wings. These heavy renovation projects may require a significant amount of input, but the completed properties will also gain significant value.
Having a specialist lending partner with expertise in the full suite of specialist financial products is crucial in today’s commercial real estate market.
Lucy Waters is Managing Director at Aria Finance
This article appeared in the July/August 2026 edition of Mortgage strategy.
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