What’s ahead for Central London’s office market in 2025?

The Central London office market faces a critical dilemma with rising vacancy rates and heightened demand for high-quality space. Investors and developers are now stuck between marketing outdated stock and setting up new premium and ESG-compliant workplaces. To understand this transition, here is a look at the current market and the trends shaping what lies ahead.

An increasing demand for sustainability and premium location preferences significantly influences the London office market’s transition. Here is a general overview of what is currently happening.

Central London is experiencing a record-high vacancy rate of 10.6% in early 2025, nearly double the pre-pandemic average of around 5%. This spike is mainly due to increasing demand for new, high-quality space, with 16.2 million sq ft office space under construction across the capital. The headline figure may imply a struggling market. However, a deeper look reveals a more nuanced reality in other submarkets.

The West End recorded the lowest vacancy across Central London, which dropped to 7.42% in Q4 2024. Meanwhile, vacancy in the city fell to 10.27%, slightly below the five-year average of 11.4%. This divergence reflects a clear “flight to quality” trend, where occupiers move from outdated buildings to centrally located, well-designed, and sustainable spaces. 

Source: BNP Paribas Real Estate

Demand for prime Grade A office spaces pushes rents upwards, especially in high-demand areas like the West End. Average rents now sit between £70 and £75 per square foot, with some trophy areas reaching £160 per square foot. This reflects an annual growth of nearly 10%, driven by occupiers’ willingness to pay more for high-quality spaces that meet their modern expectations. These include ESG alignment, wellness features, and aesthetic appeal.

The demand for premium locations and amenities reveals that today’s office is no longer about cost. It is a strategy to attract talent, impress clients, and express brand identity.

Source: Statista 2025

Flight to quality remains strong

Flight to quality is among the most enduring themes of the post-pandemic Central London office market. Tenants are increasingly shifting to Grade A office spaces that offer premium features like advanced air filtration, wellness facilities, and sustainable building designs. The trend reflects a growing desire among occupiers to use office environments as tools to attract clients, boost productivity, and align with ESG goals.

Location still matters: even top-grade offices in poorly connected areas can still struggle to attract occupiers.

Hybrid work models reshape office demands

Adopting hybrid office (1) has fundamentally influenced what tenants look for in office space. Flexibility in office usage has become non-negotiable as businesses now look for solutions that allow them to scale up or down according to their needs. While this shift started as a trend, it is slowly becoming a norm.

For instance, almost 60% of office transactions completed in 2023 involved managed solutions, and the trend continued into Q1 2024, rising slightly to 63%. The demand for flexible work models is also expected to increase in 2025 as tenants seek scalable office solutions with better leasing terms.

Rethinking flexible office for employee wellbeing

Employee office preferences are changing from a place to complete tasks to one where they can collaborate and feel a sense of comfort. For this reason, investors and developers emphasise the destination office concept by creating spaces that focus on employee wellbeing. This includes building all-inclusive flexible office spaces (2) with amenities like wellness facilities, breakout zones, and cafes.

Research also shows that the demand for the right offices is rising. For instance, Central London’s take-up reached 3.5 million per square foot at the end of 2024, a 16% rise quarter-on-quarter. This exceeded the long-term Q4 average by 3%, indicating a stabilising market.

Investment confidence is returning

Investor sentiment is stabilising after a period of uncertainty. In Q4 2024, Central Lond office investment volumes reached £1.6 billion, indicating a 22% quarter-on-quarter increase. This renewed confidence primarily focuses on prime, income-generating properties, particularly those that demonstrate tenant stability.

Foreign and institutional investors also show renewed interest in the growing office market. For instance, performance metrics indicate that more property development finance firms are willing to support projects that meet their ESG targets. This increased recognition has seen around 43% of institutional investors interested in assets with strong ESG credentials.

Sustainability & ESG is now the core

Sustainability and ESG are no longer optional- they are core value drivers in today’s office market. The UK’s Net Zero goals and the Financial Reporting Council’s 2025-2028 strategy to enhance corporate sustainability reporting add regulatory pressure to investors. These developments are compelling landlords to prioritise energy-efficient systems, sustainable construction materials, and wellness-focused amenities. However, tenants should expect a higher rent increase, especially those eyeing premium, ESG-focused properties.

You might be interested in 9 smart ways to build sustainable office designs (3)

In this article:

(1) How to design a hybrid office that works for everyone

(2) What does a flexible office look like?

(3) 9 smart ways to build sustainable office designs