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June 24, 2026
Joe Averill
15 mins
City office rents in 2026 are moving in two directions at once, and the distance between them is the most important number in any rent review or lease renewal the City will see this decade.
In August 2025, a New York law firm took an additional floor at 8 Bishopsgate in the City of London and paid approximately £147 per square foot in annual rent. The same firm had signed for 60,000 square feet in the same building, with the same landlord, two years earlier at £86 per square foot. Nothing changed except the floor — the 46th rather than the mid-rise block — and the year.
That 71% increase, in the same building, over 24 months, is the City office market in miniature. Prime and Grade A rents are rising at their fastest pace in a generation. Grade B secondary rents are falling, and in some cases falling sharply. If a commercial rent review or lease renewal is approaching, the first question to settle is which market your building is actually in — because the answer changes the number by tens of millions of pounds over a lease cycle.
This article sets out the verified figures for the City of London in Q1 2026, explains why the gap between Grade A and Grade B has opened so fast, and tells you what to do when those numbers collide with a proposed rent.
Property grades are not a formal regulatory classification. They are market shorthand for how a building measures up against current occupier expectations. The definition has tightened significantly in the last three years.
Grade A in 2026 means new-build or comprehensively refurbished space meeting the British Council for Offices (BCO) 2023 specification: floor-to-ceiling heights of at least 2.7 metres, raised access floors, VRF or equivalent air conditioning, power density of at least 12–15 watts per square metre, a BREEAM rating of Very Good or above, and an EPC rating of B or above. In tower buildings it means column-free floorplates, high-floor views, and a landlord amenity package: rooftop terrace, lounge floors, on-site food and beverage, end-of-journey facilities. Buildings that met the Grade A standard in 2010 frequently do not meet it in 2026, because the standard itself has moved.
Grade B covers everything that is in working occupation but falls short of that specification. The category spans a wide quality range, from a 2005 building with a recent Cat A refurbishment that simply lacks the amenity package, to 1990s space that has not been touched since the original fit-out. What they share is an EPC rating of C or below and a specification that no longer matches what a modern corporate occupier expects as a minimum.
EPC is now the single biggest hidden factor in Grade B softening. Approximately 58% of Central London office space currently falls below EPC Band B (CBRE). The government has proposed a requirement of EPC C by 2027 and EPC B by 2030 for commercial lettings — neither is yet statutory, but both are now assumed by corporate real estate teams when modelling occupational risk. Large corporate tenants are refusing buildings rated EPC C or below, both for their own net-zero commitments and because energy cost exposure on an inefficient building compounds every year. A building that would have been acceptable Grade B stock in 2021 is now, for many occupiers, simply unavailable at any rent. Landlords of those buildings know it.
The figures below draw from the Savills Central London Office Market Watch for Q1 2026 (published April 2026) and Knight Frank's full-year 2025 data.
Two figures in that table need to sit side by side when you read "City prime rents." The £130.80 per square foot is the statistical average across what Savills classifies as prime or trophy transactions in Q1 2026. A concentration of high-floor tower deals — several of them above £120 per square foot — pulls the average up. The £80.43 per square foot is the average across all completed Grade A transactions, including the standard office floors that most tenants actually occupy.
For most tenants benchmarking a Grade A renewal or review on a standard mid-rise City floor, the operative range is £80 to £100 per square foot. Space that sits below that on a genuine Grade A building is almost certainly capable of supporting a higher rent on review. Space that sits well above it, in a building that has not received meaningful capex in the last five years, is worth challenging on the merits of the comparable evidence.
The rent records confirm how far the top of the market has moved. In February 2026, a 4,200 square foot floor at One Leadenhall let at £160 per square foot on a stepped-rent structure, breaking the previous City record of approximately £147 per square foot set at 8 Bishopsgate in August 2025 (the Proskauer Rose deal described above), which had itself surpassed the then-record of £122.50 per square foot at 22 Bishopsgate, achieved by Banco Master in Q2 2025. Three successive City rent records in twelve months, each set in the upper floors of towers, reflects structural supply scarcity at the very best stock — not a market-wide repricing of every Grade A floor in the City.
Knight Frank's 2030 forecast for City Core prime sits at £129.75 per square foot — meaning the current £130.80 average-prime is already tracking near the long-range forecast, two and a half years early.
City Grade B rents sit at approximately £37 per square foot and are expected to fall a further 1.5% in 2026 before plateauing. The West End Grade B market is softening more slowly — down 5% on 2024 rather than 27% — because overall West End vacancy remains lower and serviced office and flexible operators there tolerate older stock more readily.
The gap between Grade A market average and Grade B average is now £43 per square foot (£80.43 versus £37). On a 10,000 square foot floor over a ten-year cycle, that is £4.3 million. On a 25,000 square foot floor, it is £10.75 million. That is the cost of the grade decision, before you account for rates, service charge, and fit-out.
A −27% year-on-year fall in headline rents sounds large. The practical reality is more nuanced: the headline has fallen, but landlords are simultaneously extending incentive packages — longer rent-free periods, increased fit-out contributions, reduced service charge caps — to compete for the tenants who will still take secondary stock. The net-effective rent on a Grade B deal in 2026 may therefore be lower than the headline suggests. If your landlord's proposed Grade B rent has not moved materially since 2023, the incentive package should have. If it has not moved either, you are paying above market on both measures.
The structural driver of the Grade B decline is concentrated demand. Grade A took a 92% share of Q1 2026 City leasing (Savills), and 74% across all of 2025 — the highest annual Grade A share on record (Cushman & Wakefield). Tenants vacating Grade B buildings are not being replaced. Buildings that once competed on rent alone are now losing on EPC compliance and specification before rent is even discussed. A Grade B landlord's choice is stark: invest in a full retrofit (typically £70 to £150 per square foot for a meaningful mechanical and electrical upgrade), or accept that the headline rent will continue to fall to whatever level makes the building viable for the occupiers still willing to take it.
The supply shortage is structural, not cyclical. Available Grade A stock in the City Core sits at approximately 0.3% vacancy for new-build space (Knight Frank). Cushman & Wakefield calculated in late 2025 that only 1.1 years of Grade A supply remained in the City Core against a 10-year average of 1.7 years — 35% below the long-run norm. Active demand stands at 14.6 million square feet, 57% above the 10-year average. Seven separate City transactions completed above £100 per square foot in Q1 2026 alone.
The pipeline does not repair this quickly. Speculative new-build starts in 2025 fell to 1.6 million square feet, down from 3.6 million in 2024 and well below the five-year average of 6.5 million (Knight Frank). Of the 2026 Central London completions, approximately 53% of the City Core pipeline is already pre-let before the buildings open. Notable completions that were pre-let in full — 2 Aldermanbury Square to Clifford Chance, for example — illustrate the pattern: the best new stock is gone before it is available.
Deloitte's crane survey flagged a supply gap in the 2027–2028 window that, if it materialises, will extend the current shortfall for another two to three years. The logic that ought to produce new starts is present — Knight Frank estimates the break-even rent for a new City development at £91.50 per square foot, which is comfortably below where prime floors are currently transacting. Construction finance costs and planning timescales are holding the pipeline narrow despite viable economics.
The constraint is real and will persist into 2027. A tenant facing a Grade A renewal in that window is negotiating in a market where landlords have structural pricing power on the best space.
Headline rent is a starting point, not an occupancy cost. The net-effective rent — which strips out rent-free periods, capital contributions, and other incentives over the term — is the number that belongs in a finance model.
Typical rent-free periods in the City in 2026:
- Grade A space: approximately 24 months rent-free on a 10-year lease (broadly stable from the 2023 Savills benchmark; beginning to shorten on trophy and top-floor stock as landlords pull back concessions)
- West End Grade A: approximately 23 months on a 10-year lease
- Canary Wharf and East London: approximately 30 months on a 10-year lease, reflecting weaker occupier demand
Carter Jonas's net-effective rent monitor (Q4 2025) found City net-effective growth at +2.9% for the full year, slightly outpacing headline growth of +2.7%. On the best Grade A stock, rent-frees are shortening in real terms even where the headline holds. On Grade B stock, landlords are extending incentives in the opposite direction.
Approximate net-effective comparison on a 10,000 square foot City floor:
The net-effective gap between Grade A market average and Grade B is approximately £38 per square foot. On 10,000 square feet over a ten-year cycle, that is £3.8 million in additional cost for Grade A against Grade B, before rates, service charge, and fit-out. Whether that premium is justified depends on whether Grade A is genuinely the building the business needs — a question the move or renew analysis is designed to answer with specific numbers rather than market sentiment.
The figures above are category B evidence: useful for calibrating expectations, not sufficient to settle a review. A commercial rent review is settled by reference to verified, devalued, arm's-length lettings of properties genuinely comparable to the subject floor. Market data tells you what end of the market your building sits in. It does not, by itself, produce the number the arbitrator or independent expert will accept.
Three things follow from the grade analysis when a review memo arrives.
First, your building's grade determines which comparables are admissible. A Grade B building is not compared to a Grade A letting unless the surveyor performing the devaluation of comparable evidence applies explicit adjustments for specification, EPC rating, floor-to-ceiling height, fit-out condition, and amenity provision. Without those adjustments, a Grade A comparable is not evidence for your floor — it is a number drawn from a different market. The difference between the two markets in 2026 is £43 per square foot. A schedule built from the wrong grade of comparables is wrong by that margin from the first line.
Second, the grade of your building is not always what the landlord's marketing says it is. A building comprehensively refurbished in 2012 and untouched since may carry a Grade A description but sit materially below the BCO 2023 specification. Low floor-to-ceiling heights, EPC D or below, floor-mounted air conditioning rather than ceiling-integrated units, no amenity floors: these are Grade B characteristics at 2026 standards. Accepting a Grade A-priced comparable schedule on a building with Grade B characteristics is the single most expensive mistake a tenant makes in a contested review.
Third, the West End comparison is no longer as useful as it was. The City/West End rent gap, on Savills' "average achieved prime" metric, has narrowed to approximately 21% in Q1 2026, described by Savills as the lowest in over 25 years. The City prime is rising faster; the West End prime held broadly flat (−0.7% on Q1 2025). A tenant benchmarking a City renewal against West End comparables from 2022 or 2023 will find the maths has moved against them. The West End record in Q1 2026 was £201 per square foot (SoftBank at 77 Grosvenor Street); the City record in the same quarter was £160 per square foot (One Leadenhall). Both are exceptional. The meaningful comparison for most occupiers is £80 per square foot City Grade A against £37 per square foot City Grade B, not trophy record against trophy record.
If you occupy a City building with a passing rent below £70 per square foot, facing a review in 2026 or 2027, there is almost certainly an argument about how much your specific floor justifies above that number — and how far below Grade A prime the correct comparables actually sit. The data above tells you the shape of the market. What counts as comparable evidence tells you how to build the case to defend it.
For tenants outside London, the regional benchmarks follow different curves and different supply dynamics — see Manchester, Birmingham, Leeds, and Bristol office rent review benchmarks 2026.
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