- London remains the world’s leading destination for foreign direct investment, attracting more than double its closest competitor Hong Kong’s project numbers, and almost seven times more than Berlin
- But the capital is in danger of winning the race for investment and then failing to provide the commercial space required for growth, given the capital’s critical shortage of modern offices
- Vacancy in London’s West End premium office market has fallen to just 0.8% – one of the lowest levels ever recorded
- London Property Alliance calls for offices to be designated as critical economic infrastructure in the National Planning Policy Framework to address dwindling supply and support economic growth
London has cemented its position as the world’s leading destination for investment at a time of heightened geopolitical uncertainty, according to the latest Global Cities Barometer from London Property Alliance. But a deepening shortage of modern office space in central London now risks choking that success, limiting the capital’s ability to convert global investment into jobs, growth and tax revenues.
The capital attracted 86 foreign direct investment projects in the most recent quarter, more than double Hong Kong’s 36, and significantly ahead of Paris at 28 and Berlin at 13. New York, by contrast, recorded its lowest project count in years, driven by reduced investment from EU countries amid US trade policy uncertainty.
London’s information and communications sector grew by more than 6% in 2025, however, that rate is forecast to slow to 2.7% in 2026, against New York’s projected 5.3%. The capital’s finance and insurance sector contracted by 0.2% in 2025, while New York’s grew by 6.1%, and the capital’s GDP growth of 1.9% is forecast to slow to 1.2% in 2026, against New York at 2.8% and Hong Kong at 2.7%.
The West End is running out of office space
The prime West End office market is facing an acute shortfall, with vacancy falling to just 0.8% in new developments, compared to London’s overall availability of 7%. In comparison, office vacancy rates sit above 20% in Manhattan.
Prime West End office rents rose 15.8% in 2025, the strongest growth of any global city analysed, reflecting the supply and demand imbalance. In Q4 2025, there were just 17 office relocations in the West End, the lowest since 2020, with 60% of occupiers renewing leases in existing buildings due to a lack of options.
London Property Alliance’s research finds that London’s Central Activities Zone (CAZ) has lost 14 million sq ft of office floorspace since 2018, with Westminster alone accounting for more than 7 million sq ft. Major planning applications in Westminster fell 75% between 2013 and 2024, contributing to a projected shortfall of nearly 11 million sq ft over the next five years.
The quality of existing stock amplifies the challenge. Over half the office space in the CAZ, some 147 million sq ft, is classified as ‘secondary’ and fails to meet the needs of modern occupiers. Upgrading this stock to prime or Grade A standard could unlock £84 billion in economic output over the next decade, alongside £262 billion in investment value and £11.4 billion in annual rental income. In Westminster alone, upgrading secondary stock could unlock £119 billion in capital value and £3.7 billion a year in prime rental income.
Office-based sectors support 2.8 million jobs across Greater London and generate close to £290 billion in GVA each year. Without a sustained pipeline of high-quality workspace to accommodate growing businesses, London’s FDI lead will not translate into the jobs and tax revenues the UK needs.
Charles Begley, Chief Executive of London Property Alliance, said: “London’s position as the world’s leading destination for international investment is a remarkable strength, particularly at a time when global uncertainty is pushing capital towards cities with stability and strong underlying fundamentals. But it is in danger of winning the race for investment and then failing to provide the commercial space required for growth.
Central London is facing a serious shortage of modern workspace that global businesses require to deliver their growth strategies. We have lost 14 million square feet of office floorspace in the CAZ since 2018, half of which is in Westminster, and occupiers are renewing leases not by choice, but because there is nowhere else to go. Offices are critical economic infrastructure. Designating them as such in the National Planning Policy Framework, giving schemes the same planning weight as data centres and gigafactories, would be a decisive and low-cost intervention that unlocks growth, creates jobs and keeps London globally competitive.”
