London office capital values can’t deny gravity forever

London office capital values fell by a relatively modest amount in the second half of last year and monthly data show values stabilised in the first two months of 2023. But that has left London office spreads very narrow at a time when the recent banking crisis is set to tighten credit conditions. With demand for London offices also facing headwinds, we now expect a slightly larger capital value fall this year and a slower recovery thereafter, with a peak-to-trough fall of 17% in the West End and 23% in the City.