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Optimism returns to the UK office lettings market in 2025

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Optimism returns to the UK office lettings market in 2025

As the festive cheer subsides and we settle back into our routines, a flicker of optimism illuminates the UK office lettings market heading into 2025. This optimism, a welcome contrast to the challenges of recent years, reflects a sector that seems poised for renewed growth after weathering a storm of uncertainty. 

Historical challenges in the office lettings market

The past few years have been anything but smooth for the UK’s office leasing sector. The COVID-19 pandemic ushered in a seismic shift in workplace dynamics, with remote and hybrid working becoming the norm almost overnight. Many businesses reconsidered their office footprints, leading to a significant downsizing trend. London, traditionally a bellwether for office demand, saw a decline in leasing activity, while regional markets also struggled to attract and retain tenants. 

This trend was compounded by economic uncertainty and inflationary pressures. Rising energy costs, coupled with a growing demand for environmentally sustainable office spaces, placed additional strain on landlords and developers. Furthermore, the transition to hybrid work introduced complexity in understanding and predicting occupier needs, leaving landlords hesitant to invest heavily in new or upgraded spaces without clear demand signals. 

However, by 2024, the landscape began to stabilise. According to CBRE’s UK Real Estate Outlook 2025, much of the anticipated reduction in office space had already taken place, leaving the market “right-sized” as it entered the new year. This reset offers a foundation for cautious optimism as the sector moves forward. 

Opportunities in 2025 

One of the most promising indicators for 2025 is the steady demand for Grade A office spaces, particularly in London and the “Big Six” regional markets: Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester. The allure of high-quality, energy-efficient office buildings is increasingly clear as companies seek to attract talent and meet sustainability goals with a view to convincing employees back into the office. 

Research undertaken by Savills’ offers further encouragement, reporting that nearly three-quarters of businesses that moved offices within the same city in 2024 chose to increase their office size. This marks a significant shift from the peak of post-pandemic uncertainty in 2021, when only 26% of such moves resulted in an expansion. 

Regional markets are also seeing growing occupier interest. Traditionally dominated by sectors like law, professional services, and financial services, these markets are experiencing a resurgence. The legal sector alone accounted for 34% of regional office transactions last year, and this momentum shows little sign of abating. As Savills highlights, the regional outlook for 2025 is positive, with occupier demand for new spaces continuing to rise. 

Another key factor contributing to this optimistic outlook is the evolution of hybrid work. While flexible working arrangements remain an important part of the workplace strategy for many firms, the idea that hybrid work would lead to the demise of office-based employment now appears overstated. Instead, hybrid work has sparked a reimagining of office spaces, with companies focusing on collaboration, creativity, and employee well-being as core design principles. 

Constraints and opportunities for investors

Despite these positive signals, supply constraints remain a challenge. The pipeline of new Grade A office developments has lagged behind demand, particularly outside London. This scarcity presents a double-edged sword: while it limits options for tenants, it also creates an attractive opportunity for investors. High-quality office stock is expected to command premium prices, and those willing to invest in sustainable, well-located properties can still see significant returns. 

Sustainability is no longer a niche concern but a business imperative. Tenants are increasingly prioritising energy-efficient spaces to align with environmental goals and reduce operational costs. As such, properties with strong green credentials are likely to dominate leasing activity in the coming years. 

A rebounding sector 

As we move deeper into 2025, the UK office lettings market will be buoyed by a renewed sense of purpose. The early turbulence of the post-pandemic years has given way to a more balanced sector, where tenants and landlords alike are adjusting to new realities. Companies are no longer downsizing; instead, they are optimising their space to foster innovation and meet the evolving needs of their workforces. 

In London, regional cities, and beyond, the appetite for office-based employment remains robust. As CBRE and Savills suggest, the sector has weathered its most significant challenges and is now positioned to grow. Hybrid working, far from undermining the office market, has catalysed a transformation that prioritises quality over quantity, creating opportunities for investors, developers, and occupiers alike. 

While challenges undoubtedly remain, from supply constraints to economic headwinds, the signs are clear: the UK office lettings market is no longer in survival mode. Instead, it is entering a phase of measured optimism, with 2025 shaping up to be a pivotal year for the sector. For those navigating the complexities of commercial property, this is a moment to embrace opportunity and prepare for the growth ahead. Landlords have reshaped their requirements to suit the tenants in the market to cope with the challenges ahead.