Prime offices defy the macro gloom

The resilience of the prime London office leasing market was on display this week as the UK's largest landlords reported half-year results. 

GPE said it had leased more space in the six months through September than it had in the previous full year.

"Choosing the best spaces in vibrant central London locations over the rest" is a structural theme "as relevant today as ever," said GPE chief executive Toby Courtauld. 

The group signed 43 new leases and renewals generating annual rent of £37.6 million per year, 7.1% above March 2025 Estimated Rental Values (ERV). Across its portfolio it expects rental growth of 4.0% to 7.0% for FY2026; prime offices stronger still at 6.0% to 10.0%.

Ahead of schedule

British Land reported £155m in half-year profits, up 8% on the same period a year earlier. 

"As a result of the strategic calls we made back in 2021, we are the market leader in London office campuses and retail parks, positioning us well to continue to benefit from the 10m sq ft shortage of prime office space in Central London and the rapid expansion of retailers out of town," said chief executive Simon Carter.

Across the portfolio, the company leased 1.4m sq ft during the period, 5.3% ahead of ERV. It has another 1.3m sq ft under offer at 7.5% ahead of ERV. It expects like-for-like net rental growth to run at around 5% for FY26 and reiterated guidance for 3%-5% ERV per year. 

Landsec meanwhile delivered 5.2% like-for-like net rental income growth across the portfolio, "as customer demand for our best-in-class offices and retail remains strong," the company said. The office portfolio delivered 6.8% net rental growth – it has another £19m of lettings signed or in solicitors' hands, 9% above ERV.

The company sold £295m of offices "well ahead of schedule, as investment market activity continues to pick up gradually." It doesn't expect to commit "meaningful capital" to new development in next 12-18 months.

You can take a deeper dive into these themes via Knight Frank's London Office Market Report.

Deferring decisions

Some of the shares came under some pressure despite the strong results.
"It is very frustrating," GPE's Coutauld told Costar. "The share prices are simultaneously driven by macro forces outside of our control."

He cited recently published forecasts of a US recession, but domestic uncertainty ahead of the Budget is likely also playing a role. "We see a slowdown in inquiry levels or people converting leases in this period up to the budget," Landsec CEO Mark Allan told reporters on Friday. 

Workspace Group, which serves a larger share of small and medium-sized businesses, reported flat net rental income and a dip in valuations. 

"It's very difficult for (our customers) to plan, course adjust, et cetera without some certainty," Workspace CFO Dave Benson told Reuters. "I do think people are waiting and maybe deferring decisions until after they have clarity of the budget."

A bad job

Polling ahead of the Budget looks awful for the government. Three quarters of voters consider the British economy to be in a bad state (79%), while a similar number (77%) say the government is doing a bad job at managing the economy, according to new YouGov polling.

The speculation over tax rises is weighing heavily on consumer sentiment. Consumers' optimism about the economy and their own finances recorded its sharpest fall this month since April, according to British Retail Consortium figures. The GfK consumer confidence barometer showed a much smaller fall, though it's still running at its lowest level since May. 

A survey of more than 10,000 people by Rightmove and shared with the Times found that 61% of potential home movers surveyed said they were aware of rumours about changes to property taxes in the budget. Nearly 80% of this group said they were concerned about the impact of any new levies on the housing market. The research suggests that nearly 20% of potential home movers have put their plans on hold. 

In other news...

Developers explore £500mn build-to-rent sale in London’s Elephant and Castle (FT), Rachel Reeves under pressure to scale back Budget raid on expensive homes (FT), UK to Create New Fast-Track Residency Path for High-Earners (Bloomberg), and finally, London second-home owners to bear brunt of Rayner’s northern bailout (Times).