‘Reports of my demise have been greatly exaggerated’ – so the famous Mark Twain quote goes. If office skyscrapers could talk, one could imagine these words echoing around central London.

Having been on life support in the aftermath of Covid, best-in-class London offices have staged a remarkable recovery. A clean bill of health is alluding the sector due to subdued investment volumes, but even here things are turning around.

Development of plush HQ offices in the capital has almost ground to a halt (for a myriad of reasons including economic uncertainty, high costs, workforce shortages, and environmental regulations). At the same time corporates are falling over themselves for the best space to entice workers back to the office. A vacuum of ‘grade A’ space is anticipated over the next few years that should see rents rise considerably.

So convinced of the dynamics at play, Great Portland Estates (GPE) last year raised £585m in a discounted rights issue and a separate bond issue and has set about putting spades in the ground to fill the anticipated void, with the aim of delivering double-digit annual returns to shareholders.

Investors have not matched GPE’s conviction levels, however, with GPE and the two other listed London office developers – Derwent London and Helical – trading at wide discounts to their net asset values (NAVs) of between 33% and 38%.

Fundamentals suggest office developers undervalued

Real estate advisor Cushman & Wakefield says that there is just 5.9m sq ft of under construction and available space completing beyond 2025 – equivalent to under one year’s supply.

GPE estimates that just 2.7m sq ft of new high-quality office space will be delivered annually over the next four years and average annual demand will be 4.7m sq ft. Cushman says that there are 13 live ‘grade A’ London office requirements above 250,000 sq ft.

This impending squeeze should translate to further rental growth, after prime headline rents in the West End rose 14% year-on-year in the first quarter of 2025 and the City core up 9.4%. GPE has guided prime office rental growth over the next year of between 6% to 10%.

It is little wonder then that large corporates are in a hurry to secure pre-lets on the few planned developments in the pipeline. Law firm Clifford Chance signed up to GPE’s 322,600 sq ft City scheme, 2 Aldermanbury Square, which is due to complete in early 2026.

Meanwhile, Helical forward sold its 195,000 sq ft development just round the corner at 100 New Bridge Street to US bank State Street for its own occupation for £333m or £1,712 per sq ft.

Investment market firing up again

Real estate investors have been wary of the office sector since the pandemic and the rise of hybrid working, while soaring interest rates cut off access to debt and set about a period of price discovery as values were slashed.

That level seems to have now been found, with investment yields stabilising across the market and liquidity returning. The first quarter of 2025 saw the highest quarterly London office investment volume since 2022, with £2.56bn transacted across 40 deals, according to Cushman, which was up 33% on the previous quarter.

At the end of March, £3.9bn worth of assets were on the market or at the bids stage, according to Cushman, with a further £1.5bn under offer.

Which horse to back?

GPE has a track record on timing the market with chief executive Toby Courtauld at the wheel. In the aftermath of the GFC, it completed a rights issue and over the next couple of years picked up assets across London, redeveloped them and sold them in rising markets achieving profit on cost of 30%-plus.

There is nothing to suggest it cannot do the same again. It currently has boots on the ground at three schemes – 2 Aldermanbury (as already mentioned); 30 Duke Street, on Piccadilly, which is on track for completion in mid-2026 with all of the office element of the 70,900 sq ft building pre-let; and the 143,000 sq ft Minerva House, on the South Bank of the River Thames, which is expected to complete later in 2026.

Behind these, it also has three near-term developments – at Soho Square Estate (near Tottenham Court Road station and the Elizabeth line – a common theme in the portfolio); St Thomas Yard on the South Bank; and the recently acquired Whittington House in the West End.

In all, these six schemes are expected to deliver 893,300 sq ft of best-in-class space in a severely supply constrained market.

On top of this, GPE is rolling out its ‘Fully Managed’ office suits to businesses that want more flex and a plug-and-play offering, having enjoyed huge success. It can charge much higher rents (double that of traditional office rates in some cases).

Derwent London says that its total return outlook is the strongest it has been for several years. It has a similar sized near-term pipeline to GPE, with two on-site West End projects due to be delivered this year.

The 218,000 sq ft office element of its 25 Baker Street scheme is 100% pre-let at a rent 16.5% ahead of the appraisal ERV. Network, which is located in Fitzrovia and is due to complete in the second half of 2025, comprises 134,000 sq ft of offices but has yet to find an occupier. The company expects these two projects to deliver a combined 15% development profit.

Beyond these, it has three West End developments in the pipeline – Holden House, where work to deliver a 133,500 sq ft scheme is due to commence later this year; 50 Baker Street (240,000 sq ft); and Greencoat & Gordon House (107,800 sq ft), the latter two of which are expected to commence in 2026 and be delivered in 2028. Its longer-term pipeline includes a mammoth development Old Street Quarter that could total 750,000 sq ft, where it expects work to start from 2028.

Additionally, Derwent has an active programme of refurbishments across its estate that it expects to deliver rental uplifts.

Helical’s near term pipeline is dominated by its partnership with Transport for London that will see it build three projects above tube stations. This includes 10 King William Street, above Bank station in the City, which is due to reach practical completion in December 2026 and comprise 140,000 sq ft of offices.

Directly above Southwark underground station, the company is building a student accommodation scheme, while in Paddington it plans to build a 19-storey, 235,000 sq ft office building above the eastern side of the station.

Outside this, it has the previously mentioned 100 New Bridge Street (which it has forward sold) and Brettenham House, located on the Thames between The Savoy and Somerset House at Waterloo Bridge where it is bringing forward a 128,000 sq ft office and retail scheme.

With major projects set to be delivered to a supply starved market over the next few years, the returns on offer look promising for these undervalued office developers. Now may be an attractive entry point for investors that share the view that offices are back.