London Square Mile Construction Momentum Strengthens

Demand for premium office space in the City of London is accelerating development activity in the Square Mile, as planning authorities and investors seek to expand supply despite persistent cost pressures affecting commercial construction projects.

Developers remain cautious as construction and financing costs continue to affect project viability, according to Tom Sleigh, chair of the planning and transportation committee at the City of London Corporation. The governing authority for the capital’s financial district has seen growing engagement from the property sector as firms assess opportunities to respond to strong occupier demand. Conditions have shown early signs of improvement as construction tender price inflation has moderated to low single digits while interest rates have begun to decline.

Market indicators highlight the imbalance between supply and demand. Vacancy rates in the City Core stood at 4.4 per cent in the fourth quarter of 2025, while vacancy for new office developments was just 0.1 per cent, according to JLL. Major buildings are already absorbing demand from a diverse range of sectors. The 1.2 million square foot 22 Bishopsgate, currently the largest office building in the Square Mile, is fully let to tenants including technology firms, renewable energy companies, legal practices and financial services groups, and is achieving record rental levels.

Planning activity has intensified as authorities attempt to unlock additional development capacity. The City Core recorded its highest number of planning applications in a decade during 2025, with more than 5.4 million square feet of office floorspace granted consent and major commercial schemes rising by 36 per cent. Knight Frank attributes this increase to a more strategic and action-oriented planning approach supported by the emerging City Plan 2040 and a broader sustainability framework.

The City Plan 2040 outlines priorities including the creation of roughly 1.2 million square metres of additional office space by 2040 while promoting a retrofit-first development strategy to support the district’s net-zero objective. However, Knight Frank notes that although roughly half of approved projects are progressing into construction, the development pipeline remains significantly below expected demand.

To support delivery of stalled or capital-intensive projects, the City of London Corporation has launched the City Business Investment Unit to help connect international investors with development opportunities. The unit will work with overseas real estate investors and collaborate with the Office for Investment: Financial Services to assist global firms navigating the UK regulatory framework while identifying projects within the Square Mile’s evolving commercial development pipeline.