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Investing.com -- JP Morgan has highlighted a recovery in the London office market, noting several supportive trends as demand increases against limited supply.
The investment bank points to declining vacancy rates across London, with the most significant improvements occurring in higher-rated buildings.
Rental growth is accelerating, particularly in the West End, from approximately 1% in the four quarters to March 2022 to around 7% in the four quarters to March 2025.
Supply remains constrained, with space under construction and renovation (still available to let) totaling less than 3% of office stock.
Meanwhile, demand is recovering, with British Land reporting that take-up of office space in Central London increased 29% in the first quarter of 2025 compared to the same period in 2024.
JP Morgan indicates that property values appear to have inflected, and their models project capital growth if rental growth continues. Great Portland Estates (LON:GPEG) (LON:GPE) has guided for prime office rental growth of up to 10% this year.
The bank’s preferred stocks in this sector are Great Portland Estates and Derwent London (LON:DLN), both rated Overweight, versus Landsec (LON:LAND) and British Land (LON:BLND), which are rated Neutral.
JP Morgan remains constructive on Workspace (LON:WKP), rated Overweight, but believes the market will wait for occupancy rates to improve before fully re-engaging.