London’s Commercial Real Estate Shift: Office Buildings Converted into Hotels

2026-01-29

Industry News

London’s commercial property market is undergoing a significant structural transformation, as under-utilised office buildings are increasingly being acquired and repurposed for hotel development. This trend reflects a broader office conversion movement driven by low office valuations, shifting workspace demand and a strong hotel sector recovery after the pandemic.

Why Office to Hotel Conversions Are Rising

Since 2019, investors have purchased nearly four million square feet of London office space with the intention of converting it into hospitality assets — more than enough to fill the city’s iconic Gherkin eight times over. Most of these transactions have taken place in the past two years, highlighting the pace of change in the commercial real estate investment landscape.

Several key market dynamics are driving the momentum:

• Plunging office property values due to hybrid working patterns, rising interest rates and lower demand for traditional workspace.
• A post-pandemic bounce in travel demand and sustained tourism recovery, increasing demand for hotel rooms in London’s core and fringe districts.
• Investors favouring flexible income streams from hotel operations over long-term office leases. Unlike fixed office rents, hotel revenue can adjust daily based on occupancy and rate trends.

Strategic Real Estate Repositioning

Commercial property owners are viewing adaptive reuse and mixed-use redevelopment as a strategic response to excess office supply and evolving urban demand. This repositioning involves transforming surplus office buildings into hotels, aparthotels and hospitality-led developments to maximise asset value and capture growth in the London hotel market.

Savills research from 2025 shows that significant blocks of office space in the City of London have been earmarked for hotel conversion, spotlighting how institutional and private investors are reshaping the capital’s real estate footprint.

Economic and Urban Impact

Office conversions unlock several strategic benefits for London’s built environment:

• Increased visitor accommodation capacity to support tourism and business travel demand.
• Generation of local jobs and economic activity through hospitality operations.
• Revitalisation of previously under-occupied office districts, enhancing urban vibrancy & mixed-use appeal.

However, planning permission remains a crucial factor. Local authorities, including the City of London Corporation, are revising planning frameworks to balance office retention with viable change-of-use applications and adaptive reuse across the city.

Looking Ahead: Commercial Real Estate Trends

While the office-to-hotel conversion trend continues to accelerate, the wider London office market shows some signs of stabilising. A modest rebound in demand for high-quality office space could influence future asset strategies and conversion viability.

Overall, office conversions into hotel and hospitality assets represent a major real estate trend in London, underscoring how shifting workforce habits, travel recovery and property market economics are reshaping the city’s commercial real estate landscape.

Source: Bloomberg