Polarisation in the London Office Market: What You Need to Know?

What is Polarisation in the London Office Market?

Polarisation in the London commercial market refers to a growing gap: modern, efficient, and eco-friendly offices are doing well, while older, poorly located ones are struggling. Tenants are moving to prime offices with better amenities, leaving others behind.

This shift is about location, flexibility, and ESG standards. Offices in central areas with strong transport links and green credentials are thriving, while others are facing longer vacancies and falling rents.

Central vs. Peripheral Locations in the London Office Market

London's office scene is a tale of two cities right now. In places like the West End, finding an empty office is like striking gold, with vacancy rates as low as 0.3%. On the other hand, areas like Docklands and South Bank are struggling with a 20% surplus of empty spaces. Hence, it is clear that businesses now prefer central and well-connected spots.

Companies are drawn to central hubs like Midtown and the City Centre for convenience and quality. We're also seeing a "flight to quality" trend, where modern offices are winning out with amenities like clean air, natural light, and tech-savvy meeting rooms that boost productivity.

Top eco-friendly office spaces (BREEAM Excellent or EPC B+) are fetching almost 20% higher rents, offering a financial incentive that's kickstarting a "green" trend, which is beneficial for both businesses and the planet.

How Hybrid Work Culture is Fueling This Divide?

Hybrid work started as a temporary solution during the pandemic but has evolved into a permanent shift, creating a significant imbalance in office space utilisation. Employees are no longer in the office daily, making it difficult to assess the required space accurately. As a result, some office spaces are flourishing while others are struggling to remain viable.

Many employees are now working from home one or two days a week. Tuesdays and Thursdays are peak office days, while Fridays are almost empty. This unpredictability makes it difficult for employers to justify large leasing decisions, as they cannot accurately predict the number of desks required weekly. As a result, the divide becomes even sharper for offices, especially in central, well-connected locations.

Even with hybrid schedules, conveniently located office spaces in London are in high demand. However, offices in less accessible areas are struggling. Companies prioritise locations that are easily reachable. This has led to a disparity where some offices are consistently full, while others remain half-empty. The key factors driving this trend are location, flexibility, and sustainability.

Vacancy Trends and the Widening Supply Gap

Vacancy rates in some London submarkets have exceeded 20%, leading to a 25% drop in office values over five years. This is due to hybrid work, poor connectivity, outdated buildings, and a mismatch between supply and what tenants want. Offices near major transport links like Bond Street and Tottenham Court Road, benefiting from the Elizabeth Line, are seeing increased rent and reduced vacancy.

Beyond rail, cycle commuting is up 20%, making facilities like showers and lockers increasingly important. Offices offering such flexibility and strong ESG credentials are outperforming. The West End's tight supply and sustained demand suggest the disparity between successful and struggling offices will widen until more suitable spaces are developed.

This trend highlights an important shift in the London office market. To remain competitive, investors and landlords must adapt by prioritising location, modern amenities, and sustainability. Failure to do so risks further devaluation and obsolescence in a market increasingly defined by distinct winners and losers.

Implications for Investors and Landlords

The commercial property market favours active landlords. Outdated, poorly located, or low-EPC offices are struggling. If the demand continues for flexible, ESG-compliant, centrally located, high-quality spaces, tenants will pay a premium.

Modern business owners are transforming underperforming properties into valuable assets through green renovations and conversions. Buildings prioritising flexibility, amenity, connectivity, technology, and sustainability demonstrate superior performance. Now, landlords need to adapt to this trend or they will face decline.

Who’s Winning in the Polarised London Office Market?

Not all London postcodes are equal in the office market. Let's break down which areas are winning and losing in London's office market:

• West End: This is the undisputed champion, with high rents, limited availability, top-notch facilities, and global appeal.
• City Core: Still a powerhouse for finance and legal companies, exhibiting strong infrastructure and consistent demand.
• Canary Wharf and Docklands: Once bustling hubs, these areas are now struggling with a lack of space, slow tenant uptake, and businesses moving closer to the city centre.

Tips for Observing Polarisation in the London Office Market

You can observe polarisation in the London office market by following these tips:

• Tenants: Think about what truly helps your team thrive. A central location, a space that supports hybrid work, and a commitment to sustainability are key for productivity.
• Investors: Look for properties in good locations that can be improved. Environmental and social responsibility benefits both the planet and your business.
• Landlords: If your building is showing its age, you have three options: invest in upgrades, find a new purpose for the space, or accept a potential decrease in its value.

Find Your Place in London’s Changing Office Landscape

London’s office market is dividing fast. Prime and connected spaces are thriving, and outdated buildings are falling behind. So it’s quite clear that if businesses and landlords want to succeed, they must adapt by choosing modern, flexible, and sustainable workspaces in the right locations.

At Office Hub, we make that choice easy. With years of experience and a global reach, we will match you with offices that meet the moment, whether you’re upgrading, relocating, or investing.

Future-proof your workspace today! Call our flexperts and explore over 5000 updated offices across London.