The Shifting Landscape of UK offices

The UK office market is evolving, and whilst each subsector - from business parks to regional cities to Central London - faces different challenges, one fundamental remains: businesses still need quality office space. After significant price corrections, investors can now access opportunities at cyclical lows amid constrained supply. Transaction volumes are set to recover through 2026, driven by landmark deals that prioritise quality, sustainability, and robust execution.

• Demand has stabilised and polarised. Hybrid is now a structural feature - 66% of office workers have a hybrid policy of some description, with these typically weighted towards the office. Requirements have refocused on best-in-class space; secondary space is being released or repurposed.  
• Central London is seeing strong occupational performance and increasing investment momentum. Large requirements and prime rents have set new highs this year. Capital is quickly recognising this, but the market is becoming increasingly competitive as institutions rejoin the party, and diversification is now needed.
• Regional cities and business parks are tightening at the top end. Big 6 take-up was 4.6m sq ft last year, the highest since 2019, while this year’s H1 total was in line with the five-year average and South East take-up has accelerated, pushing headline rents to new peaks where quality product exists.
• Grade A vacancy in the Big 6 is currently 3.6%, while new-build vacancy is lower still at just 1.1%. Overall Big 6 vacancy is c.8%, while in the South East this nudges into double-digits (10.2%), underscoring the continued bifurcation of the office sector.  
• Supply of new, top-tier space is scarce – especially outside London. New-build pipelines in the regions are very limited, with less than 600,000 sq ft under construction speculatively across the Big 6 combined.
• Regulation is a hard catalyst for obsolescence or capex. The step-ups to EPC B by 2030 will strand older and poorer quality stock, or force substantial spending to refurbish and retrofit. Pressures are particularly acute on older parks and fringe or suburban locations where economic rents are less viable, where alternative uses remain the most attractive option.
• Capital markets are bottoming unevenly. Values are showing early improvements year-on-year and total returns are positive for prime offices. Pricing is stable for high-quality, future-fit assets, while pricing is less certain and liquidity  still thinner for non-prime buildings.

Offices continue to serve as hubs which attract and retain talent, represent a company’s brand and culture, and drive team collaboration and client engagement. Occupiers have demonstrated a clear willingness to pay premium rents for higher-quality, well-designed spaces. Beyond their role as corporate productivity hubs, offices function as essential economic anchors that support broader urban ecosystems, generating the daytime populations necessary to sustain retail and leisure and essential public services such as transport networks. Future-fit offices in prime locations show strong outperformance in demand and rents, which is further enhanced where true best-in-class is delivered. Development pipelines have reached multi-year lows while regulatory requirements continue to tighten, creating genuine scarcity value for modern offices, leading to the prospect of yield compression as confidence improves and interest rates fall. 

Here we explore the reasons for confidence across the UK office sector as we move into 2026.

The hybrid work model has reached a new equilibrium, with JLL data highlighting that 66% of workers have a hybrid attendance policy, and ONS data showing 28% of workers operating in hybrid arrangements as of  2025. This stabilisation is fundamentally reshaping office demand rather than diminishing it, driving occupiers toward collaboration focused, amenity-rich spaces in highly accessible locations such as CBDs, city-fringe transit hubs, and established business parks near talent pools. The trend has been reinforced by large corporates tightening return-to-office mandates, which has provided additional support for core office demand, beyond the organic rebalancing which has been the main catalyst for demand.

The focus on newer, better and more well-located space is particularly evident in the South East and Thames Valley markets where new prime developments are observing significant rent premiums. Recent completions have driven prime rents 25% above previous peaks, with standout examples including Reading Station Hill achieving around £56 psf and Basingstoke PLANT reaching approximately £38 psf. Occupiers are strategically consolidating, higher-quality buildings, often increasing their spend per desk while reducing their overall desk count.

Central London has seen continued rental growth, with West End prime reaching £170

psf and City prime at £90 psf as of Q3 2025, and the newer class of ‘super-prime’, with all modern amenities and sustainability credentials, often now surpassing £200 psf in Mayfair and St. James’, and £120 psf in the City core. New-build vacancy remains incredibly constrained at 1.4%, and in many core submarkets this falls to virtually zero. The development pipeline slows significantly beyond this year, suggesting there will be no relief any time soon, and supporting sustained strong prime rental growth forecasts. At the same time, vacancy rates in more peripheral submarkets remain very high – above 20% in Aldgate, Camden, Hammersmith, Stratford and Vauxhall, with many office buildings now earmarked or being traded for conversion to alternative use.

The strength of the core markets is attracting capital. Investment volumes through the first three quarters of this year are up 47%, well ahead of the overall European office market growth of 17%, and the depth and breadth of active bidders and buyers has increased significantly. Institutional investors are beginning to re-enter the market, and large deals are notably more frequent – after just 12 deals of £100m+ last year, we had already seen 20 as of the end of October 2025, including 8 above £200m. But the return of institutions and continued motivation among private equity and private wealth is creating competition, and driving many investors to begin to consider diversification. With confidence in offices up, and London now very active and competitive, we expect other markets around Europe and across the UK to begin seeing a resurgence in capital.

Other UK markets can offer similar occupational demand, deliver comparable or even amplified rental dynamics, while operating from a substantially lower cost base, with regional city centres and high quality business parks chief among these.

Occupational performance across the major regional markets has been robust. Take-up has been steadily increasing in recent years with 2024 the strongest since 2019. In the first half of this year South East take-up was also the highest since 2019, while Big 6 leasing continued to show consistent strength, albeit constrained by the limited supply of good quality space. This speaks to the greatest challenge in the market, which is the increasingly chronic shortage of speculative development. New-build vacancy rates only just exceed 1% across the Big 6, and with less than 600,000 sq ft of space under construction out to the end of 2028, this will only continue to shrink as quality space is quickly absorbed.  Average new-build take-up has been more than 900,000 sq ft on average over the last 5 years, so the new supply delivered over the next 3 years will satisfy less than 8 months of average take-up.

The imbalance has driven very strong rental growth in recent years.  With average Big 6 prime rents up 32% in the 5 years to the end of Q3, and top rents now surpassing £50 psf. The pace of this growth is likely to continue, with JLL forecasts showing a further 30% growth from current levels by the end of 2030, and 4 cities expected to surpass £60 psf.

Business Parks – what makes a dominant park today?

Key factors separate market-leading business parks from the rest, those which secure full-building lettings and achieve rental premiums over their competitors. Connectivity is crucial - the best parks combine motorway access with rail links to maximise talent catchment areas. Successful parks offer great amenities such as quality food and beverage options plus wellness facilities that support modern working and lifestyles. Future ready buildings feature net zero carbon credentials, low running costs, excellent air quality, and smart technology. Flexible floorplates that can scale with business growth while allowing companies to create distinctive headquarters are equally important. Finally, parks need credible owners, either single-ownership or collaborative partnerships, with the financial capacity and expertise to invest in ongoing improvements.

Business Parks can be winners – if future-fit

The potential of well-positioned business parks is exemplified by 1000 Aztec West in Bristol. The recent £17m frame-reuse retrofit achieved net-zero-in-operation status, while delivering market-leading ESG credentials. This best-in-class execution secured a full-building letting c.78,000 sq ft to an investment-grade occupier, demonstrating that "brown-to-green" repositioning can successfully crystallise both occupier demand and premium pricing in out-of-town locations. The project proves that business parks can compete effectively in today's quality-driven market when sustainability and operational excellence are prioritised.

While occupier requirements are shaping the evolution of the top and middle of the market, it’s pressure from regulatory change that will inevitably drive improvement or obsolescence at the bottom of the market. Current but as yet unconfirmed proposals would see Minimum Energy Efficiency Standards (MEES) for non-domestic lettings in England & Wales increase with buildings expected to achieve minimum EPC B standards by 2030, subject to specific exemptions. In Scotland, new regulations will come into force next year, with buildings expected to transition to a new, more sophisticated rating system by October 2027 at the latest. This is a fundamental shift, as not only will existing EPC’s no longer be valid, but there is also no guarantee that a building’s rating will remain the same.

These regulatory timelines are focussing capital expenditure decisions across the sector. Landlords with older assets in weaker locations are increasingly pursuing office-to-residential conversions or alternative use strategies rather than investing in office upgrades. In core office locations of the future, Strategic Retrofitting of this older stock can be beneficial in numerous ways, as a route to address supply shortages, meet sustainability targets and boost returns. 

The investment market has entered a period of gradual recovery in recent months. Interest rates are coming down, the worst of recent macro-economic and geopolitical volatility seems to be easing, and real estate offers attractive risk-adjusted returns for confident and sophisticated investors. As a result, transaction volumes are picking up. In the UK, investment has reached £32.7bn in the first 9 months of the year, up 27% on the same period last year. Within this, the office sector is once again among the largest sectors, with growth of more than 50% from a low base. We expect this recovery to continue, and to diversify. To this point, much of the recovery in office investment has been driven by London, and we expect this greater liquidity to increasingly emerge across the UK.

Capital values are already increasing, and continued strong rental growth combined with modest yield compression will see this continue through the next few years, creating a very attractive entry point for investors. This is still true in all office markets, but the regional markets are at an earlier stage in the recovery cycle, so amplify the scale of the opportunity and the potential returns available for buyers today.

Pricing is currently stable, but in time we expect yields to compress modestly. Latest forecasts suggest a reduction of prime regional office yields of at least 75 bps over the next 5 years from the current levels of 6.75%. Combined with the continued rental momentum, this will drive significant capital appreciation and return expectations. Financing markets are also supportive – swap rates have stabilised at close to 3.5% over recent months and the strength of debt liquidity has driven margin compression, with the resulting all-in debt costs now accretive to returns in many cases, especially for prime buildings.

• Lighter refurbishments in regional CBDs targeting mid-sized buildings in talent-rich cities like Edinburgh, Manchester, Bristol, Birmingham, Leeds, Glasgow, Greater London and select South East towns where Grade A supply is limited and vacancy tight. Sensible, targeted capex to create good quality, core product in good locations will address the ever-growing chasm between demand and supply. Refurbishments and retrofits will be faster to deliver than full redevelopment, and the costs more manageable to ensure achievable economic rents are able to generate the necessary cash flows to deliver strong returns.
• From a portfolio perspective, the aggregation of small- and medium-sized headquarter buildings (e.g. 50-150k sq ft) into platforms can attract deeper liquidity for stabilised, ESG-compliant income streams. This will enhance the efficiency of asset management and improve exit opportunities, consequently enabling capital to be recycled into the next generation of modern offices.
• Another compelling opportunity lies in brown-to-green transformations of well-located business parks with strong transport links and ownership control. Deep retrofits incorporating fabric upgrades, modern systems, all-electric infrastructure and wellness features can achieve EPC A/B and net zero compliance, with examples such as Aztec West demonstrating the tenant demand and rental premiums achievable for such product.

• In the South East, improving prime rents justify selective investment in exceptional locations with strong specifications, particularly schemes connected to public transport  hubs like Reading Station Hill. Meanwhile, fringe assets where compliance upgrades prove uneconomic, continue to lend themselves to conversion, with industrial, residential, hotel and innovation among the most likely future uses.