UK Commercial Property Market Enters Boomtime
The UK commercial property market is experiencing a pronounced upswing driven by increased occupier demand, constrained supply, and robust investment volumes. London’s office market is tightening, with prime rents rising and vacancy rates falling, while regional centres across the South East, Midlands, and North are also seeing strong take-up of quality stock. Investors are responding with renewed capital deployment into London core assets and strategically located regional offices.
As occupational patterns evolve, the market’s momentum is expected to continue through 2025, presenting opportunities for developers, landlords, and occupiers alike.
London: The Pressure on Prime Offices
The Capital remains the litmus test for the market. It’s becoming harder and harder to find and secure office space in London, and competition is particularly fierce for premium, Square Mile office rentals, as occupiers prioritize quality, sustainability, and location. Take-up across the City of London and Midtown/West End totalled 1.3 million sq ft in Q1 2025, 4% above the five-year quarterly average.
Vacancy rates in core locations have fallen below 8%, marking the lowest levels since late 2022. Against this backdrop, prime rents climbed by 5% over the past year, with headline rents in The City/Square Mile now averaging £70 per sq ft.
Investor confidence in London has rebounded as well. Central London office investment reached £5.2 billion in 2024, up 36% year-on-year. Foreign capital accounted for almost half of that volume, underlining London’s continued global appeal. The scarcity of new, high-quality developments – driven by rising build costs and planning constraints – has added further upward pressure on rents.
Regional Markets: Widening Momentum
Healthy market signals aren’t limited to London. Outside the Capital, available office space in SE England, the Midlands, and the North, especially premium, amenity-rich stock, is being snapped up at rates that echo London’s recovery, according to recent industry data.
Birmingham recorded a 38% rise in commercial property take-up, as professional services and tech firms expanded. 800,000 sq ft of office space refurbishments will be delivered to the Big Six regional markets over the course of the following two years; prominent examples include the Havelock in Manchester, the Met Tower in Glasgow, and 24–25 St Andrew Square in Edinburgh.
In the North, Leeds saw deal volumes up 53% in Q1 2025 compared to Q4 2024, with major lettings at new developments supporting absorption. Manchester likewise reported increased occupier demand, as shown by increased enquiries and reduced vacancy in prime business districts. Pulling from combined data out of leading property firms, 98% of UK business occupiers plan to acquire more commercial property in 2025 than in 2024, and 44% view the market as entering an upturn phase.
Investment Activity and Capital Flows
Investor confidence is rising, with UK-wide investment volumes reaching £53.5bn over the 12 months to Q1 2025. Though down 15% on five-year averages, it still shows resilience amid economic uncertainty.
Regional investment has also gained traction: key regional centres attracted capital seeking yield and growth, particularly in refurbished office schemes and mixed-use projects. Logistics, warehousing and digital infrastructure/data centre submarkets remain strong, mostly due to continued ecommerce demand, but prime offices are also reclaiming attention as occupiers return to city hubs.
Development Outlook
Data centre and life science builds are leading the way with new stock deliveries for 2025. For new supply of data centres delivered in a year, the London market is predicted to hit an all-time high in 2025. There will be more new supply delivered than taken in, and London’s vacancy rate will be higher than it was in 2024. Due to increasing demand and increased build costs, prices will keep rising.
The strategic emphasis on life sciences by the Labour Government has boosted sector optimism. Significant amounts of additional space will be delivered by the lab development pipeline in 2025, namely in Manchester and the Golden Triangle, indicating a dynamic change in real estate investment towards the life sciences.
Implications for Occupiers and Investors
Occupiers face a dual challenge of securing quality space while managing cost pressures. In London, businesses are prioritizing green credentials, wellness features, and technology integrations to attract talent. In regional markets, flexible leases and plug-and-play office suites appeal to expanding firms seeking speed to market and lower capital outlay.
And with companies increasingly adopting hybrid occupation models to go along with their hybrid work models, the natural follow-on is consolidating their space to focus on collaboration hubs while maintaining smaller satellite offices for market access.
For investors, current dynamics signal opportunities in acquiring or repositioning existing assets. Targeting underused office buildings for refurbishment can capture rent uplifts. Regional centres offering lower entry costs plus strong occupier demand present attractive options, too.
Conclusion
The UK commercial property market has clearly entered a boomtime, with intensified demand, rising rents, and renewed investment across London and the regions. Occupiers and investors who act with speed and clarity will benefit most from this momentum. As the market continues to tighten, collaboration between landlords, developers, and end-users will be essential to deliver space that meets the evolving needs of the workplace and market.
