London Commercial Property – February Round-up

The London commercial property market in February 2026 is characterised by a “two-speed” recovery. While overall investment volumes started the year slowly, occupier demand for prime, sustainable assets remains exceptionally high due to a severe supply shortage.

Office Sector: Prime Scarcity and Pre-letting 

The central London office market is defined by a flight to quality. Vacancy rates for new, high-specification offices in the City Core have reached a record low of 0.3%.

• Pre-letting Dominance: Of the 5.9 million sq ft of office development due for delivery in 2026, 43% has already been pre-let by occupiers navigating the supply squeeze.
• Rental Growth: Prime rents are hitting new benchmarks. Forecasts suggest the West End could reach £200 per sq ft by the end of 2026, while the City Core is expected to reach £93–£105 per sq ft.
• Transport Multiplier: Proximity to major hubs like Crossrail is a primary rent driver, with locations like Farringdon and Liverpool Street seeing value gains of 17% to 20% over the last two years.

Retail & Industrial: Resilience and Specialised Demand 

• Retail Outperformance: Retail has consolidated its position as a top-performing asset class, with a total return of 9.6% in 2025 and a forecast of 9.5% for 2026. Demand is strongest in prime high streets and retail parks, where vacancy rates are around 5% or below.
• Industrial Supply Gap: Small to mid-box industrial units (under 100,000 sq ft) face a significant shortage, with demand suppressed by 35% nationally due to a lack of available space.
• Emerging Clusters: Speculative logistics hubs, such as the Dagenham Logistics Hub, are attracting large-scale trade retailers, while Barking Eurohub is set for new warehouse development.

Investment Trends and Outlook

• Selective Capital: Commercial investment transacted approximately £2 billion in January 2026, below historical averages. London continues to attract over half of all invested capital.
• Yield Stability: Prime yields have stabilised at approximately 5.75%, with a modest “hardening” (tightening) of 25–50 basis points expected later in the year.
• Sustainability Friction: Environmental credentials are now a prerequisite. Buildings with EPC ratings below ‘B’ face longer void periods and weaker investor interest as 2030 regulatory deadlines approach.