Owner occupier deals boost London office investment to £2bn

Central London office investment reached £2.0bn in Q2 2026, according to the latest Central London Office Analysis from global commercial real estate advisor Avison Young.

This was boosted by Barclays £750m acquisition of its 1m sq ft headquarters at One Churchill Place, Canary Wharf. This reflects a growing trend among occupiers seeking greater control over their real estate portfolios, with seven owner-occupier deals transacted across Central London in H1 2026. German investors were most active in the market, deploying £502m of capital, up significantly on £56m over the same period in 2025.

Central London office take-up totalled 2.6m sq ft in Q2 2026, over a third higher (36.8%) than in Q1, and representing the strongest quarter for take-up in a year – despite ongoing economic uncertainty. London’s office market continued to demonstrate resilience, with a notable increase in larger transactions, with deals over 50,000 sq ft rising 50% above the post-covid average.

The AI sector took approximately 500,000 sq ft of space, bringing H1 take-up to 700,000 sq ft, highlighting the capital’s growing prominence as a centre for AI activity. In Q2, activity was concentrated in the established tech hub of the King’s Cross/Euston area, boosted by the completion of Google’s 860,000 sq ft headquarters.

Prime rents and occupier demand

Prime rents increased across a few markets over Q2, with quarterly prime rental growth reaching 6.5% between Q2 2025 and Q2 2026, and the strongest growth being seen in Mayfair, St James’s and Canary Wharf. Office vacancy levels remained stable at 6.3%, despite movement in submarkets, with Midtown falling to 4.3% from the previous quarter. Despite overall stability, Grade A vacancy reached 1.9%, and now stands as low as 1.3% in the West End and the City, indicating a shortage of high-quality spaces.

James Walker, Principal and Head of London Office Leasing at Avison Young, said:
“It has been another strong quarter for the Central London Office market. AI continues to be at the center of demand, with occupiers clearly seeing the capital as the ideal hub for their UK operations.

Whilst Grade A vacancy remains constrained, we can expect to see further rental growth, with occupiers focusing their search on buildings with strong connectivity, efficient operating costs and best-in-class ESG credentials. We’re continuing to see businesses increasingly begin their searches well ahead of lease expiries, to battle the limited availability of desirable space.

The biggest challenge to the growth of the office market will be costs. Business rates, fit out costs and availability are putting pressure on delivery, but it’s clear that appetite from investors, particularly those overseas, is prominent. Balancing these cost pressures while continuing to deliver high-quality, amenity rich spaces will be critical to sustain the long-term growth of the office market.”

Flexible office demand remains firmly concentrated, with 78% of take-up this year in the West End and the City, as providers focus on delivering spaces in core locations. The former commands the highest desk rental rates at £831, reflecting robust occupier demand.

Alex Gathercole, Director – London Offices at Avison Young said:
"The flex market has evolved continuously over the last couple of years, from operator-led models to the growth of managed solutions. Occupier expectations have moved on - today it's no longer about just having space, it’s about the quality of space and what it enables. There's more emphasis now on design, amenity and overall experience, as well as flexibility around how the space is being used and how long it's used for. Supporting collaboration, culture and employee wellbeing have become key drivers."

"The take-up in Central London reflects a maturing market rather than weakening demand, and we are seeing operators transition from expansion led growth to a more disciplined focus on profitability and portfolio optimisation. At the same time, landlords are much more active in this space than they were previously."

Dominic Amey, Principal, London Investment at Avison Young, added:
“The second half of the year is likely to be characterised by continuing geopolitical uncertainty, with ongoing tensions and evolving political landscapes weighing in on investor sentiment. However, GDP returned to growth in May, driven by the services sector, reinforcing the resilience of such office-based sectors.

We expect to see further activity from overseas investors as liquidity conditions improve and valuations stabilise. Against a backdrop of elevated gilt yields, investment will remain focused on opportunities that provide a clear premium over the risk free rate. These investors will remain selective with their capital, focused on assets with strong occupational performance, secure income and rental growth prospects, underpinning long-term performance.”

Read Avison Young’s Central London Office Analysis for Q2 2026 in full here.