UK Regional Offices MarketBeat

For the data behind the commentary, download the full Q4 2025 UK Offices Report.

LOOKING BACK ON 2025

2025 is likely to be remembered as a year of resilience for the regional office market, amid heightened geopolitical and macroeconomic uncertainty. Take-up across the ‘Big Five’ and South East markets totalled 6.4 million sq ft, representing a 10% decline on 2024 and sitting 13% below the five-year average. Investment activity softened more sharply, with £1,861.7 million transacted over the year, which reflects the lowest annual total recorded since 2012.

While both take-up and investment volumes were relatively modest in the first and final quarters of the year, the overall decline was largely driven by a slowdown in activity through the middle of 2025. International uncertainty surrounding the ‘liberation day’ tariffs introduced by Donald Trump in April, alongside domestic uncertainty linked to a later-than-usual Autumn Budget, prompted many occupiers and investors to delay decision-making until greater clarity emerged later in the year.

LOOKING AHEAD TO 2026

Looking ahead, while regional office markets are expected to continue operating within a challenging and dynamic environment, the combination of modest take-up and investment volumes alongside improving macroeconomic conditions suggests the market enters 2026 with a degree of underlying momentum.

OCCUPIER MARKET

Despite a period of heightened disruption, the global economy has shown notable resilience. With forecasts pointing to further GDP growth in 2026, we expect business expansion to translate into increased occupier demand. Energy, precious metals and technology-led subsectors - in particular artificial intelligence and cyber security - are anticipated to be key drivers of expansionary office requirements.

On the topic of expansionary activity, draft findings from our National Office Moves analysis indicate that more than two-thirds of firms relocating across the regional office markets last year increased their office footprint. We expect this trend to persist and potentially intensify through 2026, as employers continue to reinforce return-to-work strategies and reassess their space needs accordingly.

Artificial intelligence is becoming increasingly ubiquitous across the economy, including within regional office markets. However, with UK business adoption rates still relatively low, many firms remain in an exploratory phase. As a result, we do not expect AI to trigger widespread job losses or materially suppress occupier demand in 2026. Instead, uncertainty around how AI will reshape organisational structures and working practices is more likely to result in greater demand for flexibility, including shorter lease lengths and more adaptable lease terms.

SUPPLY

On the supply side, the chronic undersupply of Grade A space across the regional office markets is expected to persist and potentially worsen in 2026.

The UK faces a growing set of structural headwinds that risk undermining its historic competitiveness as a destination for business investment. High-profile examples of occupiers struggling to secure suitable space or support for expansion underline the scale of the challenge. Addressing these constraints will be a critical issue over the year ahead.

The well-established ‘race to quality’ continues, as occupiers prioritise best-in-class buildings to attract and retain staff. However, this is increasingly colliding with limited availability. A ‘value equation’ is emerging, whereby scarcity of Grade A stock in core locations is forcing demand to spill over across both geography and quality, while simultaneously reinforcing the need for new supply. Where suitable space cannot be secured, occupiers may instead opt to stand pat and remain in their current space, driving an increase in lease renewals and re-gears in the near term.

Development constraints are expected to remain firmly in place. While construction costs appear to have plateaued and borrowing costs are beginning to ease, both remain elevated relative to periods of stronger development activity. Although planning reforms aim to reduce regulatory barriers, any positive impact on supply is likely to be felt over the longer term rather than within 2026.

Ultimately, any significant easing of supply constraints will depend on yield compression. Until this occurs, developer and investor confidence is likely to remain subdued, limiting appetite and funding for speculative development. Until then, refurbishments are expected to continue playing a central role in bridging the supply gap and meeting occupier demand for high-quality space.

CAPITAL MARKETS

Constrained supply continues to place upward pressure on rents across the regional office markets. With new supply increasingly constrained, rental growth is expected to remain a key feature of the investment landscape into 2026.

Limited availability of Grade A space in core locations is reinforcing demand and rental growth in a number of fringe sub-markets, as well as for assets that are high quality, if not super-prime. This dynamic is broadening the opportunity set for investors, with pricing power extending beyond traditional prime cores.

Cost pressures result from high upfront capital expenditure - particularly fit-out costs - has emerged as a primary concern for occupiers. As a result, a clearer pricing differential is developing between fully fitted and traditional Cat A space. This is supporting investor interest in well-located, non-core or Grade B assets where landlords can offer fitted solutions that deliver stronger value for money.

From a macro perspective, the relatively constructive tone of the Autumn Budget, alongside the pre-Christmas interest rate cut, has provided a growing boost to market confidence. This has been reflected in a widening pool of investors actively targeting office assets, supported by more competitive lending conditions, including tightening loan margins and improving loan-to-value ratios through the course of 2025. A forecast easing in interest rates and improving credit conditions through 2026 is expected to further support liquidity and transaction activity.

While the UK remains Europe’s most invested commercial real estate market, ongoing policy uncertainty and a constrained development pipeline present risks to the sustained deployment of capital. Nevertheless, the substantial rental growth achieved over the past five years has left many prime office assets offering net reversion. This is expected to underpin further investment demand for the sector, with momentum building as rents continue to rise.