Contents

• Across the City market

• Across the West End market

Across the City market

The City market saw a slower second quarter of 2026, which can largely be attributed to ongoing macroeconomic uncertainty and a lack of larger transactions. City take-up at the end of H1 reached 2.58 million sq ft, across 181 transactions. This was down 18% on H1 2025, down 4% on the five-year average, and down 5% on the long-term average. The largest transaction to complete during Q2 was financial services firm Natixis’s letting of the G, 1st, and 4th floors of Thames Court, 1 Queenhithe, EC4 (88,449 sq ft) – a refurbishment that completed construction in Q2.

In Q2, activity remained polarised, with fewer large occupiers completing transactions, although confidence in the market continued to be reflected in a number of sizeable under-offers. Mid-sized transactions between 10,000 and 25,000 sq ft were down 16% on the long-term H1 average, marking the lowest level since 2021 and suggesting a greater degree of caution among this segment of the occupier market. In contrast, sub-10,000 sq ft transactions picked up during Q2, with 679,543 sq ft transacted over H1, up 9% on H1 2025.

Despite the Insurance & Financial Services sector dominating office take-up over the past three years, accounting for 31% of leasing activity in 2023, 38% in 2024 and 34% in 2025, activity in the first half of 2026 has been far more evenly distributed. Take-up has been driven almost equally by the Insurance & Financial Services sector (22%), the Professional Services sector (21%), and the Tech & Media sector (20%). This more balanced sectoral mix highlights the broad-based appeal of the City market and its ability to attract occupiers from a diverse range of industries.

Demand in the second quarter of 2026 continued to strengthen, with City and Central London active demand reaching 13.86 million sq ft at the end of Q2, up 8% on the previous quarter and 72% above the long-term average. This growth has been driven in part by AI-related requirements, which are increasingly concentrated in the near term. However, the City Grade A tower vacancy rate has now fallen to just 1.9%, limiting the availability of large-scale prime accommodation. As a result, occupiers are continuing to reassess their requirements, with many including a 'stay put' option within their shortlists. Reflecting this trend, a further 1 million sq ft was known to be under offer for lease regears at the end of H1 2026, with 93% of this total attributable to occupiers currently occupying more than 50,000 sq ft.

At the end of the first half, City supply stood at 9.6 million sq ft, which equates to a vacancy rate of 7.0%. This is 50 basis points (bps) lower year-on-year and unchanged from the previous quarter. Significant additions to the pipeline this quarter include space at 10 King William Street, EC4 (142,000 sq ft) and Edge London Bridge, 60 Thomas Street, SE1 (210,020 sq ft). Strong demand for new office space in well-located, amenity-rich and core locations has kept prime supply levels low. The stronger preference for core sub-markets is evident with the City Core vacancy rate at 5.9%, down 220 bps on the 10-year average. This is compared to the City Fringe vacancy rate which currently stands at 8.0% and is 150 bps above its long-term average.

The first half of 2026 has been another half of strong rental growth, with a handful of trophy transactions boosting the prime rent. Prime rents are up 19% on H1 2025, sitting at £116.73. Grade A average rents reached £76.21, up 7% on H1 2025, again boosted by a small number of trophy transactions.

Completions totalled 1.3 million sq ft in H1 2026, 42% lower than H1 2025. Despite the slower start, we expect full-year 2026 completions to surpass 2025, reaching 4.06 million sq ft (17% above the long-term average). Of the remaining 2026 pipeline, 42% has already been pre-let; this rises to 61% in the City Core, underscoring strong demand for prime space in core locations. Notable completions include 6 More London, SE1 (147,000 sq ft) and Finsbury Dials, EC2 (144,000 sq ft).

Overall space under construction stood at 9.7 million sq ft at the end of H1, with only 28% already pre-let. The scale of speculative development underway continues to reflect confidence in occupier demand for best-in-class space. However, development starts fell sharply in H1 2026, with just 0.9 million sq ft commencing across seven schemes, all of which were refurbishments, as persistent construction cost inflation, labour and MEP constraints, increasing compliance requirements, and wider geopolitical uncertainty continue to weigh on scheme viability.

City Highlights

Across the West End market

In spite of a volatile macroeconomic environment, the West End recorded a spike in transactional activity in Q2, with 1.27 million sq ft acquired. Not only is this up 42% on Q2 2025 and 44% on the 10-year average, but it is the most active Q2 we have recorded in four years. This brought the total for H1 to 2.11 million sq ft, up 32% and 19% on the 5- and 10-year averages respectively.

This uptick in activity can largely be attributed to continued resilience in the number of mid-size and larger transactions, with all size bands over 10,000 sq ft showing activity either in line with or above the long-term average. This was most acute in transactions over 25,000 sq ft, which were at the highest levels since 2007. Similarly, the number in the 10,000–25,000 sq ft size bands were up by a third on the 10-year average. In contrast, transactions under 10,000 sq ft remain 18% below the 10-year average as uncertainty remains heightened among smaller occupiers and staying put remains an attractive option.

AI companies have been responsible for several of the larger acquisitions of space so far this year, with many concentrated around the Knowledge Quarter. The most significant to complete during Q2 2026 (and so far this year) was Anthropic’s lease of 156,000 sq ft at 1 Triton Square, NW1, on a 10-year term. Similarly, OpenAI leased a combined 88,834 sq ft at the Jahn Court and Brassworks, N1, buildings in King’s Cross. However, this growth in AI take-up has benefited other submarkets as well, with Sierra AI’s lease of the 3rd floor (41,787 sq ft) at Belvedere South, 151 Buckingham Palace Road, SW1, for £88.50 per sq ft. Overall, this sub-sector has accounted for 27% of take-up in the first half of this year, and more broadly, Tech & Media has seen a rebound in activity from the lows witnessed in recent years, recording the highest levels since H1 2021.

This high level of activity resulted in the vacancy rate dropping for the third consecutive quarter to 7.5%, down 60 bps year-on-year. Tenant-controlled space also fell sharply this quarter by 22% to the lowest levels in over two years, aided by almost 160,000 sq ft of lettings at the Meta-controlled space at 1 Rathbone Square, W1.

Eight schemes totalling 1.17 million sq ft reached practical completion in Q2, bringing the total for H1 to 1.47 million sq ft. A further 2.35 million sq ft is expected to complete in the second half of the year, which would be a record amount of completions in a single year. However, over a third of the remining space this year has already been pre-let, and delays are still persistent as a result of continued pressures and challenges over debt, labour and other costs, likely resulting in many schemes seeing their practical completion dates moved out. These pressures have also impacted development starts, which fell to 676,000 sq ft in H1 2026, down 20% compared with H2 2025 and 40% with H1 2025, therefore increasing the chances of a supply crunch down the line.

Constraints in future availability are particularly apparent in the core, where in Mayfair, 50% of the 2026–2029 pipeline has already been pre-let or is under offer, and in St James’s this figure is 76%. This has resulted in occupiers pre-letting far in advance of expected building completion dates. For example, in Q2, Arini Capital Management pre-let the entirety of 25 St George Street, W1 (39,450 sq ft), a scheme which is not expected to be delivered until the second half of next year. This, and several other core prime transactions, helped push the H1 average West End prime rent to £175.10 per sq ft, up 2.3% year-on-year.

West End Highlights

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