LPA says offices should be 'critical infrastructure' as London faces office supply crunch

London’s position as a global leader for foreign direct investment (FDI) is under threat from a growing shortage of modern office space, according to new analysis from the London Property Alliance (LPA).

The capital attracted 86 FDI projects in the most recent quarter, more than double the number recorded in Hong Kong and significantly ahead of other major global cities including Paris and Berlin. However, the LPA warns that a lack of suitable workspace is increasingly constraining the city’s ability to convert investment into economic growth.

The issue is most acute in the West End, where vacancy in prime office developments has fallen to just 0.8%, one of the lowest levels on record. Across central London, limited supply is driving strong rental growth, with prime West End rents rising by 15.8% in 2025.

At the same time, occupier activity is being affected by the shortage of available space. In the final quarter of 2025, office relocations in the West End fell to their lowest level since 2020, with a majority of occupiers opting to renew existing leases due to a lack of alternatives.

The LPA’s research highlights a longer-term contraction in office supply across the Central Activities Zone (CAZ), which has lost approximately 14 million sq ft of office floorspace since 2018. Westminster alone accounts for more than half of that reduction.

Planning activity has also slowed significantly, with major applications in Westminster falling by 75% over the past decade. As a result, the LPA estimates a potential shortfall of nearly 11 million sq ft of office space over the next five years.

The quality of existing stock is identified as a further constraint. More than half of the office space in central London is classified as secondary and does not meet the requirements of modern occupiers, particularly in terms of sustainability, amenity and performance.

The LPA argues that upgrading this stock could unlock significant economic value, but warns that without a consistent pipeline of new and refurbished Grade A space, London risks losing its competitive edge.

Office-based sectors currently support around 2.8 million jobs in Greater London and generate close to £290 billion in gross value added annually.

In response, the organisation is calling for offices to be designated as critical economic infrastructure within the National Planning Policy Framework. It argues that this would help prioritise development, accelerate delivery and ensure that supply keeps pace with demand from global investors and occupiers.

The warning comes as competition between global cities intensifies, with the LPA cautioning that London’s ability to sustain its leading position will depend on its capacity to deliver the workspace required by modern businesses.