UK Regional Offices MarketBeat

For the data behind the commentary, download the full Q4 2024 UK Offices Report.

Expectations for 2025

The regional office markets in 2025 will continue to navigate challenging and dynamic environment, shaped by evolving occupier and supply-side trends, alongside shifting capital market conditions.

The ‘return to office’ push will increase, which will influence occupiers’ workplace strategies for 2025 and beyond. With construction costs continuing to rise – albeit at a slow rate – many occupiers are expected to minimise capital expenditure by focusing on pre-fitted office spaces. In turn, these factors will drive greater creativity and flexibility in deal structures.

Key regional markets will maintain their appeal, attracting footloose demand and commanding significantly higher rents for the best space compared to recent years. This reflects the ongoing ‘flight to quality’, with occupier preferences continuing to shift towards high-quality, centrally located spaces with strong sustainability credentials.

The competition for the current undersupply of high-quality stock is expected to intensify, with pent-up demand for best-in-class offices persisting. In response, pre-let agreements may become more prevalent as occupiers seek to secure premium space, further driving rental growth. For speculative development activity to gain traction, economic viability hinges on a combination of sustained rental growth and reductions in interest rates.

On the capital markets front, stabilising investment yields and anticipated interest rate cuts are set to enhance liquidity, particularly for larger lot-size trades. This normalisation of transaction volumes will encourage more investors to re-enter the market as confidence improves. Combined with a recovering investment climate, these factors are expected to stimulate greater activity, boosting the overall health of the regional office markets.