Mega-deals in London’s office market came roaring back last year as the sector continued its recovery from the Covid era deep freeze.
Latest figures from analysts CoStar show that enthusiasm among both occupiers and investors ramped up in 2025 as the “return to the office” trend gathered pace and interest rates fell.
There were 14 new office lettings of more than 100,000 sq ft in 2025, the joint-highest recorded since 2017 and double the 2024 total. According to CoStar occupiers are ready to “commit to large spaces for the long term.”
Most of these lettings were expansions with employers such as law firm McDermott Will & Schulze, investment managers Squarepoint and Ares trebled their footprints by taking a combined 635,000 sq ft at The Lazari Building in Mayfair, 65 Gresham Street in the City, and 1 Hanover Street in the West End, respectively.
Canary Wharf was particularly busy with JPMorganChase and HSBC each taking around 200,000 sq ft, in an admission that they had downsized too much in the aftermath of the pandemic. Payments giant Visa recently agreed terms to 195,000 sq ft at 1 Sheldon Square in Paddington to 300,000 sq ft at 1 Canada Square.
The deals came as London office demand turned strongly positive last year, following several years of heavy losses. Net absorption of just under 4 million sq ft in 2025 was the strongest year for occupancy gains since 2018, reducing the overall vacancy rate slightly.
Improving occupier demand, rising rents and improving lending conditions also encouraged investors to return.
There were 19 office transactions of £100 million or more in 2025, excluding retail-led Bond Street deals, according to CoStar. This is up 73% on the 11 recorded in 2024, as institutional investors from the UK, Australia, the Middle East and Japan all returned to the market.
Bumper £200 million-plus transactions are on the rise, too. There were eight in 2025, up from just one in 2024. While still well down on the average of 13 recorded in 2021 and 2022, there have already been two recorded in the opening weeks of 2026.
Deals included Hayfin’s purchase of 70 St Mary Axe in the City for £330 million at a 5.5% yield; and Royal London acquisition of 1 Newman Street in Fitzrovia for £250 million at a 4.5% yield.
There are signs of the market stirring for older, larger blocks in good locations. Bloomberg reported that London-based private equity firm Castleforge was in talks to buy the 36-storey CityPoint building, originally built in 1967 as headquarters for BP. Market sources have told CoStar News that discussions are in the “mid-£400 millions” range.”
Mark Stansfield, senior director of UK analytics at CoStar, said the renewed demand combined with a dwindling construction pipeline was pushing up prime rents across central London with £200 sq ft increasingly seen in the West End, and £150 sq ft in the City representing “a big jump from a few years ago.”
He added: “There have been a couple of big starts in January such as 75 Lon don Wall but generally it’s quiet and the amount of space under construction i low compared with pre-pandemic levels. Refurbishment are more popular than new construction from the ground up.
“High construction costs are still deterring new development, as well as more stringent regulation and the slowed up planning pipeline.”
