Office demand in the City of London slumped by 23% year-on-year in the first quarter of 2026, as the outbreak of war in Iran prompted investors to stall decision-making, according to new data from Rightmove. Across the capital as a whole, demand fell by 14% during the same period, bucking the consensus of soaring demand for central London property.
Iran War Triggers ‘Pause for Thought’
Property experts attribute the sudden shift to the Iran war, which began in February, causing a “pause for thought” in the rush for commercial space. Some London boroughs experienced even steeper declines: Tower Hamlets saw a 51% drop in office leasing demand, while Wandsworth recorded a 35% fall. Only Camden and Lambeth saw marginal improvements, with demand rising by a mere 1% each.
The drop in London office demand far exceeded the national trend, where a 3% fall was recorded across the UK. Demand to lease retail and leisure space also declined, falling by 9% and 11% respectively. Industrial property was the sole bright spot, with demand increasing by 6%.
Investment Demand Slumps
Investment demand for office space fell by 9% in the UK and 18% in London. Leisure property investment also proved unpopular, down 14%, while retail investment demand slipped by just 2%. In contrast, industrial investment demand soared by 13%.
Rightmove said the Iran war is a key driver behind the shift. Andy Miles, commercial managing director at Rightmove, commented: “The uncertainty from the fallout of the war with Iran may have given both businesses and investors a reason to pause for thought. At a time when many analysts are predicting two or even three increases to the Bank of England’s base rate this year, decision making becomes difficult.”
Earlier this year, markets had expected multiple interest rate cuts, but the Iran war has left businesses bracing for potential hikes. Michael Sears, a member of the advisory panel for Rightmove’s report, added: “The data clearly points to a market that is becoming more cautious, with both occupiers and investors reassessing commitments in the face of ongoing uncertainty.”
Comparison to Record 2025
Both experts noted that the current slowdown appears particularly stark when compared to the exceptionally high demand for office space seen in 2025. “Much of the slowdown is coming off a particularly strong 2025, and activity levels remain above those seen two years ago,” Sears said. Indeed, demand to invest in office space remains 53% higher than the same period in 2024, according to Rightmove.
