London Grade B: 18% Vacancy and Falling

18% vacancy in London Grade B offices. 4% in Grade A. Same city. Same quarter. Two completely different markets. The flight to quality that started as a trend is now a structural reality — and Grade B stock is running out of time to respond.

Why Grade B Can't Compete

The problem isn't cosmetic. You can't solve this with a lobby refurbishment and new carpets. Grade B buildings face three structural disadvantages that worsen with each passing year:

• EPC ratings — most Grade B stock sits at D or E. After April 2027, buildings below EPC C can't be legally let. Upgrading a 1980s building to EPC C costs more than many are worth.
• ESG misalignment — corporate tenants with net zero commitments can't occupy buildings that actively increase their carbon footprint. Grade B buildings are a Scope 3 liability.
• Workplace experience — in a hybrid world, employees need a reason to commute. Strip lighting and ceiling tiles aren't it. Grade A buildings offer amenities, daylight, air quality, and the kind of environment that makes people choose the office over the sofa.

What Happens to the 18%

Three outcomes: conversion (residential, student, last-mile logistics), demolition and rebuild, or slow deterioration. The economics vary by location. Inner London Grade B has conversion potential. Suburban Grade B often doesn't. Some buildings will simply sit empty until the land value exceeds the building value, and demolition makes financial sense.

Frequently Asked Questions

Can Grade B buildings be viably upgraded to Grade A?

Sometimes — but only if the building has good structural bones, adequate floor-to-ceiling heights, and a location that justifies the investment. The upgrade cost typically runs £150-300 per sqft. Do the maths against local Grade A rents before committing.

Is this trend permanent?

Yes. The drivers — ESG regulation, hybrid work, valuation methodology — are structural, not cyclical. There will always be a market for value office space, but the definition of "acceptable minimum quality" has permanently shifted upward.