Office market recovery shaped by a new workforce model

The UK office market remains in a period of transition, shaped by shifting corporate policies and the lasting effects of hybrid work. While some businesses have reinforced return-to-office mandates, others continue to prioritise flexibility, leading to a fundamental shift in office space requirements.

With hybrid work now firmly embedded in corporate strategies, companies are rethinking how they use office space. Many are downsizing, choosing shorter lease terms, or seeking flexible work environments that accommodate evolving workforce needs. This shift has forced landlords to adapt, either by upgrading office spaces to meet demand or by repurposing underperforming buildings.

This article looks at office demand in 2025, market recovery challenges, landlord adaptations, and the future of office spaces with hybrid work policies.

The State of Office Demand in 2025

A Divided Market 

Office demand in 2025 remains uneven, with a clear divide between prime and secondary office locations. While high-end office buildings in major cities are seeing strong leasing activity, older office stock in less central locations is facing long-term vacancy issues. Businesses are prioritising flexible, energy-efficient spaces that align with hybrid work models, leaving outdated office buildings struggling to attract tenants.

Stronger Demand in Prime Office Locations 

Leasing activity has increased in Grade A office spaces, particularly in London, Manchester, and Birmingham. Financial, legal, and corporate firms are driving demand for high-quality offices, with rents in prime London locations exceeding £100 per square foot. These companies require modern, well-equipped environments to accommodate hybrid work and in-person collaboration.

Weaker Demand for Secondary Office Stock 

Older office buildings without strong sustainability credentials or central locations are seeing persistently high vacancy rates. Many companies are downsizing or adopting shared workspaces, further reducing the need for traditional office footprints. In regional markets, demand is focused on well-located, high-spec offices, while outdated properties with poor transport links are struggling to secure tenants.

Changing Office Occupancy Patterns 

Hybrid work continues to shape office demand. Midweek office attendance is highest, while Mondays and Fridays remain quieter. Instead of maintaining large office spaces with fixed desks, companies are shifting toward hot-desking, flexible layouts, and adaptable office designs. While many businesses still require office space, they need less of it, reinforcing the growing divide between high-demand properties and those facing decline.

Challenges to Market Recovery

Despite increased leasing activity in prime locations, the office market faces structural challenges that are preventing a full recovery.

Corporate Downsizing and Reduced Office Footprints 

Many businesses have permanently reduced their office space requirements due to hybrid work policies. Instead of maintaining large, underused office spaces, companies are shifting to smaller, more efficient layouts that prioritise shared and collaborative areas over fixed desks. This has weakened demand for traditional office leases, particularly in secondary office markets where businesses have more flexible options.

Generational Divide in Office Demand 

A significant challenge in the office market is the generational divide in workplace preferences. Younger employees, particularly millennials and Gen Z, expect greater flexibility and often prioritise hybrid or remote work arrangements. A 2023 Deloitte survey found that 77% of UK Gen Zs and 71% of UK millennials would consider looking for a new job if their employer required full-time office attendance. In contrast, many senior executives, often Gen X and baby boomers, believe in-office presence is essential for productivity, company culture, and professional development.​

This generational divide is influencing leasing decisions, with firms that rely on younger talent avoiding long-term office commitments, while industries like finance and law push for in-office mandates. Strict return-to-office policies have led to higher turnover, especially among younger employees. If businesses don’t adapt, they risk losing talent to remote-friendly competitors, further reducing office demand. This shift is driving greater demand for co-working spaces and flexible leases, requiring landlords to adjust to a hybrid-focused market as workplace demographics evolve.

Economic Uncertainty and Reluctance to Commit to Long-Term Leases 

With interest rates and operating costs still high, many companies remain cautious about making long-term lease commitments. Businesses are increasingly opting for shorter, flexible leases, allowing them to adjust their office space as needed. This trend has made it harder for landlords to secure stable, long-term tenants, particularly in older buildings that require significant investment to remain competitive.

Oversupply of Outdated Office Stock 

The market has a surplus of outdated office buildings that are no longer suited to modern tenant expectations. Many of these properties lack strong sustainability credentials, efficient layouts, or desirable locations, making them difficult to lease without major refurbishment. With businesses prioritising quality over quantity, older office stock continues to see high vacancy rates.

As these challenges persist, landlords are having to rethink their strategies to stay competitive.

How Landlords Are Adapting

Upgrading Office Spaces to Meet Tenant Expectations 

To remain competitive, many landlords are refurbishing older office buildings with updated layouts, improved ventilation, and smart technology. Sustainability has become a key factor, with tenants favouring energy-efficient offices that reduce operational costs and meet ESG (Environmental, Social, and Governance) standards. Offices with green certifications such as BREEAM or LEED are commanding higher rents, as companies prioritise long-term cost savings and compliance with corporate sustainability goals.

Flexible Leasing and Adaptable Workspaces 

The demand for shorter, more flexible lease terms has led landlords to rethink their leasing strategies. Many are introducing co-working models or serviced office spaces, offering businesses greater flexibility while ensuring steady occupancy. Shared spaces with on-demand meeting rooms and hybrid work-friendly layouts are becoming increasingly attractive to companies looking to avoid long-term lease commitments.

Repurposing Underperforming Buildings 

For office buildings that struggle to attract tenants, landlords are increasingly turning to office-to-residential conversions or mixed-use developments. Properties in secondary locations with persistently high vacancy rates are being reconfigured to accommodate retail, leisure, and residential spaces alongside office units. This strategy allows landlords to maintain profitability while adapting to shifting market conditions.

What’s Next for the Office Market?

The office market is not only in the process of recovery, but it is evolving as well. Landlords must continue to adapt to changes in long-term business strategies.

Increasing Disparity between Prime and Secondary Office Spaces 

The gap between high-quality office spaces and outdated secondary stock is expected to widen further. Prime office locations with strong sustainability credentials, modern layouts, and high-spec amenities will continue to attract tenants. Older office buildings that lack these features will either face permanent high vacancy rates or be repurposed.

Hybrid Work and Long-Term Demand 

As hybrid work is now firmly embedded in corporate strategies, especially within firms reliant on a younger workforce, the overall demand for office space may stabilise at a lower level than before the pandemic. Fewer companies are committing to expansive, long-term leases.

Future Office Design and the Role of Technology 

Offices will continue to evolve, with a focus on technology-driven workspaces that enhance collaboration and efficiency. Smart buildings with automated systems, hybrid-friendly meeting spaces, and high-quality air filtration will become the norm. Landlords who invest in these features will be best positioned to attract tenants in the coming years.

Final Verdict

The office market is not returning to pre-pandemic norms, but rather shifting towards a more flexible, technology-driven, and sustainable model. It is evolving to meet the demands of a workforce that no longer fits the traditional office model. Those who adapt will thrive, while outdated office spaces will face continued uncertainty. Businesses and landlords that adapt to these changes will define the next phase of commercial real estate.