London office leasing demand falls sharply in 2026 second quarter
Leasing demand for office space in London dropped by 11% in Q2 2026 compared to the previous year, with significant declines in most boroughs. Nationally, office leasing demand fell by 2%, though some regions saw modest growth.
Leasing demand for office space in London experienced a notable decline in the second quarter of 2026, according to data from Rightmove’s Commercial Insights Tracker. The overall drop was 11% compared to the same period in 2025, a year which had seen strong demand. Nationally, demand to lease office space fell by 2%, but this masks regional variations, with Scotland, the East Midlands, and the South East recording slight increases.
This trend has implications for landlords and investors considering commercial property, especially those looking to diversify from residential buy-to-let portfolios. The decline in demand is concentrated in older, lower-quality office spaces, while modern, energy-efficient Grade A offices with strong amenities continue to attract tenants.
Rightmove data reveals borough-level drops and pockets of growth
Rightmove’s tracker covers 11 key London boroughs, with 10 showing negative leasing demand year-on-year. Lambeth was the only borough to record growth, with a 1% increase. The sharpest falls were in Kensington & Chelsea (-34%), the City of London (-30%), and Hammersmith & Fulham (-26%).
Louise Sedgwick, commercial director at Rightmove, explained that the headline figures do not tell the whole story. The decline is against a high base in 2025, and demand is increasingly focused on high-quality office space with strong environmental credentials. Secondary office spaces, particularly in less attractive locations, are struggling not only in London but across the UK and in major European office markets.
For landlords, this means that the commercial property sector is becoming more segmented, with quality and location playing a decisive role in tenant demand. The shift away from older office stock may require landlords to consider refurbishment or repositioning strategies to maintain occupancy and rental income.
Context of commercial property challenges and opportunities
The commercial property market has faced ongoing challenges from hybrid working trends, economic uncertainties, and evolving tenant expectations. The demand for office space is no longer uniform, with many businesses seeking flexible, sustainable, and amenity-rich environments.
For residential landlords exploring commercial property as an alternative investment, the data suggests caution. While commercial property may offer diversification benefits, the sector’s complexities and the uneven demand highlight the need for careful due diligence. The regulatory environment for commercial property remains less restrictive than residential lettings, but market dynamics are shifting.
Investors should also consider regional variations. The growth in leasing demand in Scotland, the East Midlands, and the South East indicates that opportunities may exist outside London’s core markets. However, the modest scale of growth in these areas suggests that returns may be more limited or require longer-term strategies.
Practical implications for landlords and letting agents
Landlords with commercial property or those considering entering the sector should assess the quality and location of their assets carefully. Properties that do not meet modern standards for energy efficiency and amenities may face longer void periods and downward pressure on rents.
Letting agents will need to advise clients on market realities, including the importance of targeting tenants seeking flexible and sustainable office environments. Marketing strategies may need to be adjusted to highlight green credentials and on-site facilities.
For buy-to-let landlords diversifying into commercial property, the data underscores the importance of understanding local market conditions and tenant demand trends. Portfolio diversification should be balanced with an awareness of the potential risks associated with secondary office stock.
Uncertainties and what to watch
The commercial property market remains subject to several uncertainties. The long-term impact of hybrid working patterns is still evolving, and economic conditions may affect business expansion plans and office space requirements.
Regulatory changes related to environmental standards and building safety could also influence the viability of older office buildings. Landlords should monitor government announcements and local authority policies that may affect property standards and compliance obligations.
Additionally, the outlook for commercial rents and capital values is uncertain, with some commentators suggesting that annual capital appreciation may be limited going forward. This adds another layer of risk for investors considering commercial property as a refuge from residential market pressures.
Considerations for landlords now
Landlords should review their commercial property holdings to identify any that may be vulnerable due to location or condition. Planning for upgrades to improve energy efficiency and amenities can help maintain tenant interest and comply with evolving standards.
Engaging with letting agents who have expertise in commercial office markets will be important to understand tenant demand and rental pricing. Landlords should also keep abreast of regional market developments, as some areas are showing signs of growth.
For those contemplating a move into commercial property, thorough market research and financial modelling are essential. Understanding the nuances of office space demand and the differentiation between prime and secondary stock will help avoid costly missteps.
Keeping your commercial property portfolio aligned with market demands
Membership of The Landlord Association (TLA) offers access to compliance resources and market insights that can support landlords managing commercial properties. TLA’s developing ORBIT platform, currently available in BETA testing, aims to help landlords and letting agents organise property records, monitor regulatory updates, and keep documentation related to property standards and tenant communications in one place.
ORBIT’s tools for recording inspections, repairs, and compliance activity can be particularly useful for landlords needing to demonstrate adherence to environmental and safety regulations in commercial properties. Accessing TLA member compliance support can assist landlords in preparing for new obligations and adapting to market shifts.
Exploring TLA membership and ORBIT BETA access can provide practical assistance for landlords navigating the complexities of commercial office lettings and maintaining portfolio performance amid changing demand patterns.
Looking ahead, landlords should remain vigilant to shifts in tenant preferences and regulatory frameworks that will shape the commercial property sector’s prospects over the coming years.
Sources: Landlord Today
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