The big UK office round-up: How was 2025 for your market?

To office market participants and observers, 2025 marked the year when the recovery finally began. Following four-and-a-half years of heavy demand losses totalling 48 million square feet across the country, as companies re-sized footprints and adapted to new working practices unleashed – perhaps temporarily – by the pandemic, net absorption of office space turned positive in 2025 as companies occupied 1 million square feet more space than they vacated in the first three quarters of the year. It was also the year when demand broadened beyond the super-prime office buildings that had been driving all the demand.

However, the sector remains challenged and highly polarised. Some markets, submarkets and types of buildings are outperforming, while others continue to struggle with high vacancy rates, weak demand and limited prospects for near-term rent growth, despite the receding construction pipeline.

CoStar’s analytics team examines how the UK’s key office markets have fared during another challenging year.

Market conditions in the London office leasing market improved noticeably in 2025, as demand strengthened and the upward trend in vacancies was finally reversed. For the first time since 2017, London has experienced four consecutive quarters of positive net absorption, and the vacancy rate has begun to fall after six years. However, vacancies remain historically high at around 11%, in part due to the strong prelet activity removing space from the pipeline rather than from the standing stock.

Demand remained focused on the best space in the best location, as evidenced by London’s largest new buildings, such as One Leadenhall, 1 Broadgate and Panorama St Paul’s, all reaching practical completion with the most, if not all, space let. Resurgent occupier demand in Canary Wharf drove leasing to a six-year high, with new leases to Visa and HSBC, as well as Morgan Stanley’s renewal on 550,000 square feet at 20 Bank Street.

There were six new lettings over 100,000 square feet in 2025, double the number recorded in 2024. The largest was the prelet of 400,000 square feet at 65 Gresham Street to global investment management firm Squarepoint, as revealed by CoStar News, which will expand from the 100,000 square feet it occupies at Citypoint. Expansion was a recurring theme in many of the year’s high-profile transactions, particularly within the financial sector. In December, JPMorgan announced plans to build a 3 million square-foot tower on the Riverside South site it purchased in 2012.

The growing shortage of top-quality stock led to ongoing growth in prime rents across all markets. Rents of over £100 per square foot are increasingly common in new City of London towers. In August, as revealed by CoStar News, law firm Proskauer paid £147 per square foot on the 46th floor of 8 Bishopsgate. The West End also experienced upward pressure on prime rents, illustrated by McDermott Will & Shulte’s prelet of 110,000 square feet at The Lazari Building on Brook Street at a headline rent of £182.50 per square foot.

There is likely to be further upward pressure on rents in 2026 as the pipeline begins to thin further. London office construction starts slumped to a 15-year low in 2025, which will intensify the competition for both space being built and in the pipeline.

Appetite for large lot sizes has returned this year as the outlook for the occupier market has improved. In 2025, there was a 60% increase in deals signed at prices above £100 million compared with 2024. Market participants believe that a further seven deals over £100 million are under offer, with the renewed interest placing strong downward pressure on yields.

As rental growth strengthened, investor focus shifted away from value-add opportunities, which had dominated purchaser motivation in 2023 and 2024, towards core and core-plus strategies. Large sales to domestic purchasers include Nuveen's sale of the Can of Ham office building at 70 St Mary Axe to Capreon, the investment company of the Noé family, and alternative investment manager Hayfin Capital Management for around £330 million.

Economic uncertainty, the high cost of debt and an ongoing disparity in pricing expectations between sellers and buyers have all hindered sales volumes. There was little improvement in turnover in 2025 from the previous year’s total, which was itself the weakest year since 2004. However, with the improving occupier market and expected further base rate cuts, sales activity is expected to improve in 2026.

Manchester’s office leasing has resumed the strength of activity seen during the first half of the year, following a summer lull. While the vacancy rate remains at an 11-year high, it has stabilised in 2025, at just under 11%, as positive net absorption reached a post-pandemic high. Corporate occupiers taking new or refurbished space continue to dominate the larger lettings, led by the recently completed No. 3 Circle Square and supported by December lettings at M&G’s refurbished Aviary.

With improvements in office sentiment and an increase in back-to-office mandates this year, Manchester's secondary office stock is regaining some traction, after years of negative absorption. The year has seen a broader mix of deals on secondary space, headlined by government, finance and education sectors. In addition to robust leasing activity, fewer occupiers have left this space. The out-of-town market has also improved: Trafford has experienced its strongest leasing activity since the pandemic, Salford Quays has seen renewed interest and Stockport hit the headlines with Vitality’s recent 45,000-square-foot letting at Stockport Exchange.

The Manchester investment market remains subdued, with volumes at around a third of the five-year average trading over the past 12 months. Well-located properties with secure income and reversionary potential remain key motivators for buyers. For example, Corum acquired fully occupied 85,000 square feet 201 Deansgate in October for approximately £29 million. Several investments have been made with an eye to conversion to other uses, such as Barclay House, 35 Whitworth Street West, for residential and Church House on Deansgate for a hotel.

The upward movement of the vacancy rate in Birmingham is beginning to slow as supply and demand become more evenly balanced. Net absorption, while still negative, has improved in recent quarters and there has been a slowdown in new supply. However, similar to other office markets, the vacancy rate stands at a 10-year high, at 9.6% and is higher than the national average (8.7%).

Leasing demand has been strong for newly built, top-quality buildings and the highest-specified refurbished offices. This has been headlined by several professional services firms signing at the recently completed Three Chamberlain Square, supported by activity at One Centenary Way and the increasing number of refurbishments, such as 19 Cornwall Street.

Meanwhile, secondary space has contributed to the marked improvement in net demand this year, following substantial losses since 2021. Although this is more a result of occupiers remaining in their existing space than improved take-up activity. In the public sector, this partly reflects a broader government strategy to retain existing office space, such as 100,000 square feet of lease renewals by government departments at Victoria Square House. With occupiers continuing to demand flexibility, coworking lettings have also been active in 2025, with Cubo and Gilbanks among the handful of occupiers that took good-quality, refurbished space.

While investment volumes remain subdued, activity has picked up from low levels over the past few quarters, with large buildings such as Two Snowhill and the Lewis Building at various stages of the sale process. Over the past 12 months, volumes have amounted to £120 million, which compares with the annual five-year average of £300 million. Several investments have been made for conversion to residential in recent months, while Baskerville House was a major office transaction during the year, selling for £38 million and facilitated by University College Birmingham’s recent letting.

Glasgow’s office market in 2025 was defined by elevated vacancy and ongoing structural change, but also by resilience at the top end. The market’s vacancy rate has climbed above 12%, reflecting both a lack of major corporate relocations and persistent negative net absorption. However, headline figures obscure the strength of best-in-class space: just 120,000 square feet of 5 Star-rated offices remain available, the lowest total in over a decade, with the lion’s share at Lucent.

Rental expectations at the Bothwell Street building and recent record rents at the nearby Aurora underscore the appeal of amenity-rich, sustainable buildings. Prime (5 Star) rents recorded double-digit growth in 2025, compensating for weaker performance in secondary buildings.

Indeed, lower-rated stock has struggled, with 4 Star vacancy reaching 25% and average void periods rising to 25 months. Renewals and re-gears surged, with 17 deals in the City Core in the first nine months of 2025, while smaller sub-5,000-square-foot lettings continue to dominate, accounting for 85% of new leases and over 125 deals in the past year, buoyed by the rise of fitted "plug and play" space.

Investment activity picked up in the second half of the year, though just over £100 million was transacted, well below the long-term annual average. Prime yields have softened to around 8%, and recent deals, such as Ediston’s acquisition of Central Exchange and Sentinel, highlight renewed investor interest in repositioning opportunities, particularly on Waterloo Street in the city’s International Financial Services District.

Structural changes in office employment, especially within financial services, have driven negative net absorption across Scotland’s capital in recent years, but the tide turned in 2025. Major consolidations appear largely complete, with Royal London and Lloyds Bank committing to significant city centre footprints, and BlackRock expanding into 140,000 square feet at 20 Brandon Street. Baillie Gifford’s Haymarket office is due to open in the new year.

Despite these high-profile moves, overall leasing remains subdued: 2025 take-up looks set to hit a 17-year low of around half a million square feet, down 60% on 2024 and half the 10-year average. This is partly due to a shortage of modern, large floorplates; only four city centre buildings can accommodate a 50,000-square-foot requirement, none of which have been built in the past 20 years. Out-of-town demand has been particularly weak following a surge in activity in west Edinburgh in 2023–24.

Still, rents have held firm, with prime deals consistently exceeding £45 per square foot and super-prime townhouse space reportedly achieving over £49 per square foot. Incentives have tightened, with rent-free periods for top space now the shortest among the UK’s Big Six cities at nine months.

Investment activity remains muted, with around £100 million transacting in 2025, two-thirds below the five-year average. Edinburgh’s 4 and 5 Star office yields have stabilised, but the gap between higher-rated buildings and their 3 Star counterparts has widened to nearly 300 basis points, reflecting limited investor appetite for secondary stock amid weaker tenant demand and detrimentally high capital expenditure requirements. Select assets, such as Quartermile One, continue to attract interest, underlining the enduring appeal of best-in-class offices in the Scottish capital.

Improving sentiment and the completion of two of Bristol's largest leasing deals since 2021 have resulted in a significant improvement in the city's occupier market in 2025. Annual net absorption has turned positive for the first time in six years, now standing at 160,000 square feet, compared with a five-year average of minus 250,000 square feet. Leasing has accelerated, with annual leasing volumes in 2025 reaching their highest level since 2019.

In September, Hargreaves Lansdown signed a 20-year lease on more than 90,000 square feet at the Welcome Building, the largest letting in the wider market for four years and the biggest deal in the city centre since 2019. Momentum has also been gathering pace in the out-of-town markets. In July 2025, Rolls-Royce sublet over 86,000 square feet from Babcock at Aviva's 100 Bristol Business Park. The deal is the largest letting in Bristol's out-of-town market this year.

Vacancies peaked at the beginning of 2025 and have been declining since then. The fall has been driven by the strengthening leasing and a sharp fall in the volume of space under construction. High costs of borrowing and construction, along with continued economic uncertainty, suggest that downward pressure on vacancies will persist. Local market participants predict that the lack of new buildings will create a "black hole" of prime supply over the next few years, which will likely drive a sharper contraction in vacancies than the wider UK market.

Average office rental growth in Bristol has slowed over the past couple of years; however, the strengthening demand for high-quality office space has driven rents for the very best space to new heights. Law firm DAC Beachcroft paid £46.50 per square foot for a terraced floor at the Welcome Building, while fellow legal firm Birketts is believed to have paid around £50 per square foot for an 8,000-square-foot unit at CEG's EQ building in July 2025.

The volume of space under construction has fallen sharply over the last 18 months; 120,000 square feet of space is now being built, well below the 560,000 square feet underway at the end of 2023. The dwindling development pipeline may limit potential options for quality-focused occupier requirements in 2026, driving prime rental growth. Market participants anticipate rents in one of Bristol’s new prime offices in the city’s central business district to reach the upper £60s per square foot over the next few months, a new high-water mark for the market.

High interest rates and concern over the health of the office sector have weighed on transaction activity. Annual office investment volumes stand at just over £200 million, below the market's five-year average of nearly £300 million.

Activity has also been impacted by the relative paucity of stock being brought to the market, although trading conditions have become more liquid in recent quarters. By the end of 2025, approximately £150 million of stock was available for purchase, compared to around £100 million six months earlier. The most notable deal of the last 12 months was US private equity firm Blue Owl Capital’s purchase of the freehold interest in 121 Winterstoke Road from Northtree in July 2025. Blue Owl Capital paid £40 million for the building.

The Leeds vacancy rate has stabilised over the past two years amid positive net absorption, limited completions and the loss of some older stock. At a vacancy of 6.7%, the market has fared relatively well compared to other key regional cities and the UK average, sitting 200 basis points below.

Headline activity has been driven by a handful of mid-sized lettings from professional and financial services firms for the best space at Vastint's Aire Park scheme. This has been led by Eversheds Sutherland’s 47,000-square-foot letting at Kellstone, which lifted prime rents in the city to £46 per square foot.

There is a growing demand for larger, fitted and furnished spaces, as well as lease flexibility, from small and medium enterprises, as landlords look to compete with coworking companies. These continue to acquire space, with 2-Work and IWG among the key deals. The education and health sectors remain a driver for change of use for secondary offices. Several educational organisations have taken spaces ranging from 15,000 square feet to 20,000 square feet. In the healthcare sector, GenesisCare will turn a 27,000-square-foot office space at Thorpe Park into a treatment centre.

Investment activity in Leeds remains relatively subdued, with volumes for the past 12 months at £125 million, compared with the five-year rolling annual average of £248 million. Recent investors have shown interest in good-quality, well-located offices with strong income but at reduced prices, such as recently refurbished Hepworth House (£17.6 million) where Capita has a 12-year unexpired lease term. As in other cities, opportunities for change of use purchases are increasing across secondary office space.

Berkshire and North Hampshire, which lies in the heart of the Thames Valley, saw a sustained recovery in office demand in 2025. Net absorption of office space turned positive for the first time since 2018, with around 500,000 square feet more offices occupied than vacated in the past 12 months. At 13%, the market’s vacancy rate remains comfortably above the national average as of late December, but it has fallen by nearly 200 basis points over the year, providing momentum moving into 2026.

The standout story in 2025 was the resurgence of Reading’s out-of-town market, especially Green Park, which has emerged as a hub for the UK’s defence industry. A host of noteworthy lettings pushed office take-up in the Reading Fringe submarket to nearly 400,000 square feet. This represents a 20-year high, accounting for 23% of total Berkshire and North Hampshire take-up in 2025, another 20-year high, and double the historic average. Demand is also improving in Reading’s town centre, with firms continuing to target prime space close to the station. A 42,000-square-foot letting by energy firm Centrica over the summer took One Station Hill to 70% occupancy six months after its completion. However, weak demand for older space means that vacancies in the town remain stubbornly high.

The upturn in occupier market conditions has yet to attract investors, with investment volumes remaining at historically low levels amid concerns over high vacancy rates and potential further price declines. Investors continue to explore office-to-residential conversion opportunities, with Abbey Wharf and Kennet Place in Reading both selling for this purpose in 2025. This type of deal is likely to continue supporting volumes in 2026.

Leasing activity in Cambridge surged in 2025, reaching its highest level since 2021, driven primarily by technology and engineering occupiers. This momentum offset a sharp decline in lab space leasing, which fell by more than 70% year-on-year following an exceptional 2024 and AstraZeneca's decision to pause a £200 million investment. Despite this slowdown, Cambridge's business and science parks remain highly active. Notable transactions include Arm's acquisition of a 95,000-square-foot building at Peterhouse Technology Park, Microsoft's lease renewal on Station Road, and Zeiss's extension at Cambourne Park.

However, strong leasing volumes have not translated into positive net absorption due to a significant influx of new supply. Vacancies are at their highest level in more than 15 years and are expected to rise further as more office space comes online. Construction activity remains at historically high levels, with over 500,000 square feet of new space scheduled for delivery in 2026. This has proved a drag on rental growth, which has slowed markedly after years of strong gains. Prime rents for 4- and 5-star offices remain stable at £60–£65 per square foot, with exceptional lab-enabled deals exceeding this level.

Investment activity in Cambridge's office market has remained subdued through much of 2025, reflecting the broader caution across UK capital markets. The market remains characterised by smaller lot sizes, with institutional investors largely on the sidelines and private equity and overseas buyers driving the limited activity.

Despite the muted transaction environment, Cambridge remains a strategic target for capital seeking exposure to knowledge-based economies. The city's robust occupier fundamentals, anchored by global tech and biotech firms, provide a degree of resilience that few regional markets can match.