In a shifting London office market, size really is starting to matter. Faced with rising rents, more businesses are choosing smaller office spaces—often in prime locations—over expansive, traditional floors. For landlords, this trend offers both opportunities and challenges, especially as tenant demands continue to evolve.
As leasing strategies change, so too must the approach to marketing, fit-outs, and pricing. Let’s explore why small offices are becoming the go-to choice for London businesses, and what it means for landlords with commercial space to let in 2025.
Why businesses are going smaller
The rise in office rents across Central London has played a huge role in pushing businesses to downsize. Average costs per square foot have increased, particularly for Grade A and sustainably certified buildings. With the cost of living still elevated and hybrid work patterns now the norm, many businesses are reassessing how much space they truly need.
For employers, this isn’t just a matter of savings. A smaller office in a better location can mean improved staff retention, easier commutes, and a stronger brand presence. Smaller spaces also require less operational oversight, making them ideal for businesses wanting a leaner footprint.
Hybrid work continues to shape decisions
Hybrid working models have gone from short-term fixes to long-term frameworks. Most London-based businesses now support flexible work arrangements, with employees splitting time between home and the office.
This means companies no longer need the same number of desks or breakout areas they once did. Rather than paying for unused square footage, firms are reducing their leased area—and prioritising quality, not quantity.
Smaller offices are easier to manage and furnish for hybrid needs. A well-designed 1,000 to 2,000 sq ft space can now meet the demands of a 20-person team that only comes in two or three days a week.
Prime location is still non-negotiable
Despite shrinking office sizes, location remains critical. Businesses aren’t giving up on Central London—they’re simply adjusting how much they take.
From Soho and Clerkenwell to Southbank and Shoreditch, small units in Grade A buildings are in high demand. Companies are happy to sacrifice size for access to transport links, client convenience, and employee satisfaction.
For landlords, this creates a new type of opportunity: offering compact, high-quality spaces in great locations to suit small but discerning occupiers.
The rise of CAT A+ and plug-and-play
Smaller office tenants want minimal hassle. Long gone are the days when a tenant would take a shell space and commission a full fit-out. In today’s market, flexibility and speed are top priorities.
That’s why CAT A+ offices—those that come fully fitted and furnished—are becoming the go-to product in the small office segment.
Tenants looking for commercial properties to rent in London now prefer plug-and-play spaces they can occupy within weeks, not months. These spaces include meeting rooms, kitchens, desks, and breakout zones—all ready to use from day one.
For landlords, investing in CAT A+ fit-outs can reduce void periods, shorten negotiation times, and command higher per square foot rents—especially for smaller units.
Demand trends: who’s choosing small?
A wide variety of occupiers are driving the demand for small office spaces across London:
- Start-ups and scale-ups in fintech, digital, and media
- Professional services firms like law, recruitment, and consulting
- Satellite teams of global corporates who need a London base
- Hybrid-first businesses that use the office for collaboration, not daily attendance
These tenants often want lease terms between 1 and 5 years, prefer flexibility, and are willing to pay a premium for ready-to-use space.
As such, landlords who can cater to their preferences with fitted, well-located offices will find themselves in a strong position.
Challenges for landlords with larger stock
While demand is rising for smaller spaces, it poses a challenge for landlords with large, traditional floorplates.
In some cases, entire 5,000+ sq ft spaces may sit vacant while subdivided spaces in the same building get snapped up. The key issue is adaptability. Landlords who cannot split their spaces or offer fit-out flexibility may find it harder to secure tenants.
This is particularly true for older office stock. Large, outdated floors in buildings with low EPC ratings or minimal amenities are losing ground in this new landscape.
Solutions: how landlords can adapt
1. Subdivide large floors
Where feasible, consider reconfiguring larger floors into 1,000 to 3,000 sq ft units. These are ideal for current tenant demand and can appeal to a broader market.
2. Invest in CAT A+ fit-outs
Tenants want to move quickly. Offering fully furnished, tech-enabled space removes a huge barrier to entry.
3. Offer flexible lease terms
Smaller occupiers may not commit to 10-year leases. Shorter terms with break clauses, or managed office options, can open your space to more prospects.
4. Market to the right tenant base
Small creative agencies, consultants, legal teams, and tech start-ups are actively looking in this market segment. Tailor your marketing and agent briefings accordingly.
5. Boost amenities
Even in small offices, amenities matter. Access to bike storage, showers, meeting rooms and breakout areas can set your space apart.
Rental implications
In some buildings, smaller units are now achieving a higher rent per square foot than larger ones. Why? Because they’re more accessible to growing companies and offer cost certainty. It’s often easier to pay £8,000 per month for a premium 1,200 sq ft office than take on 5,000 sq ft at a discount.
Landlords who divide and fit out space for this segment often increase total revenue by letting multiple units at premium rates. It’s not about more tenants; it’s about the right mix of flexibility, price point, and usability.
Long-term outlook
The shift toward smaller offices isn’t just a passing trend—it’s part of a broader transformation in how London works.
Work patterns have changed. Technology enables collaboration beyond walls. Offices are no longer just a place to work—they’re a brand asset, a cultural hub, and a recruitment tool.
As long as these dynamics continue, the demand for small, high-quality office spaces will remain strong. And that means landlords who evolve with the market will stand to gain.
Final thoughts
Rising rents, hybrid work, and a focus on sustainability have reshaped London’s office market. More businesses are choosing smaller offices that work harder for them, and the demand for flexible, fitted, well-located spaces is only growing.
For landlords, this is a moment to rethink, repackage, and reposition. Whether you manage a boutique building in Soho or a large tower in the City, meeting the needs of modern occupiers means prioritising flexibility, design, and speed to market.
London may be one of the world’s most competitive property markets—but for landlords who cater to evolving tenant expectations, there’s still plenty of opportunity to thrive.
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