LPA Warns Office Shortfall Could Derail London Overseas Investment
London has reinforced its status as the world’s top destination for investment, but a worsening shortage of modern office space is threatening to undermine that advantage, according to the latest Global Cities Barometer from the London Property Alliance.
The city attracted 86 foreign direct investment projects in the most recent quarter, more than double Hong Kong at 36 and comfortably ahead of Paris with 28 and Berlin with 13. New York, by contrast, posted its lowest project count in years, hit by a drop in EU investment amid ongoing uncertainty around U.S. trade policy, the LPA said.
Growth in the UK capital’s information and communications sector exceeded 6% in 2025 but is expected to slow to 2.7% this year, lagging New York’s projected 5.3%. Finance and insurance contracted by 0.2% last year in London, while New York recorded 6.1% growth. Overall GDP growth in London is forecast to dip from 1.9% to 1.2% in 2026, again trailing New York at 2.8% and Hong Kong at 2.7%.
A chronic lack of suitable workspace threatens to hinder London’s progress, the LPA warned.
In the West End, vacancy in new developments has fallen to just 0.8%, compared with an overall London availability rate of 7%, both far below the more than 20% vacancy in Manhattan. Prime West End rents jumped 15.8% in 2025, the strongest increase of any global city tracked.
Just 17 office relocations were recorded in the West End in Q4, the lowest level since 2020, while 60% of occupiers opted to renew existing leases.
London’s Central Activities Zone has lost 14M SF of office floor space since 2018, with Westminster accounting for more than half. Major applications in the borough fell 75% between 2013 and 2024, contributing to a projected shortfall of nearly 11M SF over the next five years.
More than half of the CAZ’s 147M SF of office stock is classed as secondary, and the LPA said upgrading that to prime or Grade A could unlock £84B in economic output over the next decade, alongside £262B in investment value and £11.4B in annual rental income.
“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,” London Property Alliance CEO Charles Begley said in a statement. “But it is in danger of winning the race for investment and then failing to provide the commercial space required for growth.”
The LPA suggested designating offices as critical economic infrastructure in the National Planning Policy Framework to give them the same planning weight as data centres and gigafactories.
“[That] would be a decisive and low-cost intervention that unlocks growth, creates jobs and keeps London globally competitive,” Begley said.
