UK Commercial Real Estate Market Analysis by Mordor Intelligence
The United Kingdom commercial real estate market size stands at USD 148.80 billion in 2025 and is forecast to reach USD 177.40 billion by 2030, reflecting a 3.58% CAGR. Momentum is returning as 2024 investment volumes climbed 20% and base-rate cuts expected in 2025 lower borrowing costs. E-commerce expansion keeps demand for grade-A logistics space 8% above pre-pandemic averages, while corporates drive a sustained “flight-to-quality” toward energy-efficient offices as EPC regulations tighten [1]HM Treasury, “Spring Budget 2025: Economic and Fiscal Outlook. Institutional allocations continue to diversify into data-centres and life-sciences facilities following an eight-fold surge in average data-centre capacity uptake since 2019. England remains the capital magnet with 78% United Kingdom commercial real estate market share, yet Scotland leads regional growth at a 4.8% CAGR on stronger inventory and buyer activity . The sales model still dominates at 65% share, but rental-led strategies are expanding at 4.3% as occupiers favor flexibility.
Key Report Takeaways
- By property type, the office segment led with 45% United Kingdom commercial real estate market share in 2024, while logistics is projected to expand fastest at a 4.7% CAGR through 2030.
- By business model, sales captured 65% of the United Kingdom commercial real estate market size in 2024; the rental model records the highest projected CAGR at 4.3% to 2030.
- By geography, England held 78% revenue share in 2024; Scotland is forecast to advance at a 4.8% CAGR to 2030.
- By end-user, corporates and SMEs accounted for 70% share of the United Kingdom commercial real estate market size in 2024, while the individuals/households segment is growing at a 4.1% CAGR.
- Segro PLC, Derwent London PLC and British Land jointly controlled major London office space in 2024.
UK Commercial Real Estate Market Trends and Insights
Drivers Impact Analysis
Driver | (~) % Impact on CAGR Forecast | Geographic Relevance | Impact Timeline |
---|---|---|---|
Accelerating e-commerce warehousing demand | +1.4% | National logistics corridors | Medium term (2-4 years) |
Flight-to-quality toward grade-A ESG-certified offices | +0.9% | London, Manchester, Edinburgh | Long term (≥ 4 years) |
Growth of life-sciences & data-centre real estate | +0.8% | Golden Triangle; London, Manchester | Medium term (2-4 years) |
Rising institutional appetite for build-to-rent portfolios | +0.6% | London, Manchester, Birmingham | Medium term (2-4 years) |
Freeports & tax-incentive zones energising industrial demand | +0.5% | Thames, Liverpool, Teesside | Short term (≤ 2 years) |
Source: Mordor Intelligence
Accelerating E-commerce Warehousing Demand Across the UK
Warehouse leasing reached 27.97 million sq ft in 2024, 23% above the five-year average as on-line retailers and manufacturers compete for edge-of-city plots. Grade-A units comprised 77% of transactions, underscoring a quality-centric market that aligns with occupiers’ automation requirements. Near-shoring strategies are now in play for 25% of European corporates, driving UK-based buffer stock locations. Manufacturing tenants already represent 32% of logistics take-up, signalling a diversification away from pure e-commerce fulfilment. Combined with freeport-linked tax holidays, these trends sustain a 4.7% CAGR for logistics within the United Kingdom commercial real estate market
Flight-to-Quality Toward Grade-A, ESG-Certified Offices Nationwide
Prime office rental growth is pacing 2.6% per year to 2030 despite an 8.7% vacancy rate, illustrating a clear bifurcation between compliant and obsolete assets. Buildings meeting EPC-B thresholds command valuation premiums that reach 25% in core sub-markets. Upcoming EPC deadlines—‘C’ by 2027 and ‘B’ by 2030—place close to GBP 93 billion of stock at risk of becoming stranded. Corporates favouring green leases help lock-in longer weighted average lease terms, stabilising income for landlords. The premium-driven gap therefore incentivises institutional retrofits across the United Kingdom commercial real estate market.
Rapid Growth of Life-Sciences & Data-Centre Real Estate Enabled by Government Grants
Life-sciences take-up in the Golden Triangle climbed to 982,000 sq ft in Q3 2023, 20% above the five-year mean. Government “growth package” grants and simplified planning have unlocked new stock pipelines. Simultaneously, data-centres now classed as Critical National Infrastructure draw more than 50 dedicated real-estate funds with USD 50 billion in firepower. Power-secure sites around London and Manchester host an eight-times rise in capacity uptake since 2019. These high-spec assets command long, inflation-linked leases that appeal to pensions and insurers chasing duration within the United Kingdom commercial real estate market.
Rising Institutional Investor Appetite for Build-to-Rent Portfolios amid Severe Housing Shortage
BTR investment hit GBP 800 million in Q3 2024 as institutional owners scale suburban blocks from Leeds to Birmingham. The model benefits from persistent affordability barriers that keep first-time buyer activity suppressed. Regulatory friction in the buy-to-let sector pushes private landlords out, shrinking supply and enabling consistent rental uplift. Portfolio landlords harness professional management and amenity packages that mirror commercial grade operations. The asset class therefore deepens diversification options inside the United Kingdom commercial real estate market.
Restraints Impact Analysis
Restraint | (~) % Impact on CAGR Forecast | Geographic Relevance | Impact Timeline |
---|---|---|---|
Construction-material inflation & labour shortage | -0.7% | London & Southeast | Medium term (2-4 years) |
Persistent retail-space rationalisation in secondary cities | -0.4% | Secondary town centres | Long term (≥ 4 years) |
Tightening loan-to-value ratios amid gilt volatility | -0.3% | National | Short term (≤ 2 years) |
Source: Mordor Intelligence
Construction-Material Inflation & Labour Shortage Post-Brexit
Material costs rose 60% between 2015 and 2022 versus 35% on the continent, while labour costs advanced 30% amid a 330,000-worker shortfall. Iron prices jumped 88% and steel 25%, making new-build feasibilities challenging. Resultant delays cut new commercial orders by 20.8%, constraining the pipeline of grade-A supply. Higher cap-ex tilts capital toward standing assets, uplifting valuations but widening the quality gap. These pressures shave 0.7 percentage points from the forecast CAGR of the United Kingdom commercial real estate market. [2]Department for Business & Trade, “UK Freeports Programme Guidance
Persistent Retail Space Rationalisation in Secondary Cities
Vacancy remains elevated in non-core town centres as consumer spending migrates on-line and toward destination retail parks. Institutional buyers re-enter only prime schemes, leaving peripheral malls susceptible to repurposing. Retailers streamline footprints, seeking flexible lease terms and experiential formats that smaller centres struggle to provide. The divergence presents selective value-add plays but drags overall sector growth. As a result, the retail slice of the United Kingdom commercial real estate market faces a structural, not cyclical, cap on expansion.
Segment Analysis
By Property Type: ESG Drives Premium Office Valuations
The office category retained 45% of the United Kingdom commercial real estate market in 2024 and is poised to compound at 2.6% annually, supported by demand for grade-A, low-carbon space. Prime yield compression to 5.96% in London underlines investor confidence even as hybrid work patterns persist. Secondary stock faces elevated vacancy and capital-expenditure drag from EPC mandates, forcing repositioning or conversion. Meanwhile, the logistics stock, though smaller in share, commands a 4.7% CAGR on sustained e-commerce fulfilment and manufacturing near-shoring. Life-sciences laboratories and data-centre campuses add a high-growth “other” tranche that lifts blended returns across the United Kingdom commercial real estate market.
Tenant behaviour accentuates the divide. Global occupiers embed carbon neutrality clauses within leases, creating rental premia that reward green-certified towers. In contrast, outdated buildings risk functional obsolescence without multimillion-pound retrofits. Logistics remains undersupplied, with demand for 50,000-sq-ft urban warehouses especially acute. Data-centre power availability dominates site selection, pushing developers to partner with utilities on renewable micro-grids. These cross-currents make property-type allocation the principal alpha driver in the United Kingdom commercial real estate market over the decade.
Note: Segment shares of all individual segments available upon report purchase
By Business Model: Rental Growth Outpaces Sales
Although outright sales captured 65% share in 2024, the rental avenue is compounding at 4.3%—the quickest among monetisation modes inside the United Kingdom commercial real estate market. Yield-hungry pensions load up on long-income warehouses and multi-family blocks to hedge liability durations. PropCos recycle capital by disposing of stabilised assets into core funds, redeploying proceeds into development pipelines. Rental inflation in logistics registers 5.5% for 2024 and a forecast 3.7% for 2025, cushioning lenders against debt-service shocks.
Flexibility drives occupier lean. Landlords roll out short-cycle leases with expansion rights and turnkey fit-outs, mirroring subscription models. The uptick in mixed-use schemes blends retail, living and workspace, enabling cross-subsidisation of rents. Institutional investors expect falling capital values to unlock higher entry yields, fostering additional rental stock accumulation. Income-focused strategies therefore scale faster than capital-gain tactics across the United Kingdom commercial real estate market.

Note: Segment shares of all individual segments available upon report purchase
By End-user: Corporate Demand Drives Premium Space
Corporate and SME occupiers controlled 70% of usage in 2024 and remain the anchor clientele for grade-A assets. Real estate now functions as a talent-attraction lever, driving willingness to absorb premium rents for net-zero premises situated near transport hubs. Supply-chain re-engineering elevates logistics demand from manufacturers seeking dual-sourcing resilience. These preferences filter through to longer lease terms, stabilising cash flow for landlords within the United Kingdom commercial real estate market.
Individuals and households, though smaller today, will expand at 4.1% CAGR as BTR delivers institutionally managed homes. Larger schemes offer on-site work lounges, gyms and parcel rooms, mirroring service levels found in grade-A offices. Government bodies and universities underpin the “other” bucket, especially in life-sciences clusters where public-private labs secure 20-year leases. Combined, diversified end-user demand bolsters occupancy fundamentals and cushions cyclical swings in the United Kingdom commercial real estate market.
Geography Analysis
England retained 78% of the United Kingdom commercial real estate market in 2024, powered by London’s global finance nexus and a robust Southeast ecosystem. Prime West-End offices saw yields firm to 5.96%, the lowest since September 2023, while development remains restrained, sustaining rental growth above long-run norms. Regional powerhouses—Manchester, Birmingham and Leeds—absorb rising capital, reflected in the GBP 150 million BTR scheme in Leeds and multiple logistics parks along the M62 corridor. Knowledge-axis locations within the Golden Triangle deliver 50% of national lab space, driving premium land values and compressed yields.
Scotland leads the growth table at a 4.8% CAGR heading to 2030, thanks to active buyer pipelines nudging transaction volumes toward 1.25 million in 2025. Rental escalations remain moderate at 2.5%, keeping affordability in check and attracting inward investment. Edinburgh’s office refurbishments target energy-performance upgrades, while Glasgow witnesses logistics conversions of redundant heavy-industry land. Wales and Northern Ireland, though smaller, harness policy-led regeneration and freeport status—particularly Belfast Harbour—to spur industrial uptake and hotel conversions.
Freeports at Thames, Liverpool and Teesside stimulate duty-free import processing and advanced-manufacturing hubs, producing new micro-markets outside historical centres [3]Office for National Statistics, “Construction Output in Great Britain: January 2025. Planned updates to the National Planning Policy Framework aim to accelerate housing delivery and mixed-use approvals in undersupplied locales. On balance, geographic dispersion of capital flows counterbalances London dominance, broadening the depth and resilience of the United Kingdom commercial real estate market.
Competitive Landscape
The United Kingdom commercial real estate market is moderatly fragmented as traditional REITs, private capital and niche operators converge. Segro PLC focuses on urban logistics, controlling 8.5 million sq.ft of space and partnering with utilities for renewable-powered data-centre campuses. Derwent London PLC leverages a design-led strategy to achieve BREEAM-Outstanding certification, ensuring premium rents from ESG-minded tenants. British Land widens its regional footprint through a GBP 200 million Manchester mixed-use acquisition.
Specialists proliferate in life-sciences, with Legal & General injecting GBP 300 million into purpose-built labs and Huddersfield-based developer Stirling acting as a joint-venture counterparty. PropTech disruptors employ AI for energy optimisation; Landsec’s rollout cut portfolio emissions 15% while bolstering comfort levels. Mixed-use mega-schemes illustrate boundary blurring, and 68% of professionals anticipate integrated quarters will dominate future pipelines.
Joint-ventures spread risk across capital sources: Segro/utility alliances on data-centres, Tritax and port operators on freeport logistics, and Grainger with councils on suburban BTR. The top five landlords control roughly 45% of prime city-centre floor area, leaving room for mid-cap entrants but setting high ESG and digital standards. Continuous asset-level innovation will define competitive positioning as the United Kingdom commercial real estate market transitions toward carbon-aligned, tech-enabled portfolios.
UK Commercial Real Estate Industry Leaders
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Land Securities Group PLC
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Segro PLC
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Derwent London
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Hammerson PLC
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British Land Company PLC
- *Disclaimer: Major Players sorted in no particular order

Recent Industry Developments
- May 2025: Amazon Web Services unveiled an GBP 8 billion five-year plan to expand UK data-centre capacity, deepening digital infrastructure demand.
- April 2025: Segro PLC partnered with a major energy supplier to develop renewably powered data-centres, pioneering integrated real-estate–utility models.
- March 2025: British Land closed a GBP 200 million mixed-use site purchase in Manchester, signalling enlarged regional ambitions.
- February 2025: Legal & General committed GBP 300 million to life-sciences facilities across the Golden Triangle, adding 500,000 sq ft of lab space.
UK Commercial Real Estate Market Report Scope
Commercial real estate is a property used exclusively for business-related purposes or to provide a workspace rather than as a living space. Most often, commercial real estate is leased to tenants for income-generating activities. In general, it includes buildings used for commercial purposes, including office buildings, warehouses, and retail buildings (e.g., convenience stores, 'big box stores, and shopping malls).
The UK commercial real estate market is segmented by type (office, retail, industrial and logistics, hospitality, and other types [schools and recreational areas]) and key city and region (England, Wales, Northern Ireland, Scotland, London [City], and the Rest of United Kingdom). The report offers market size and forecast values for the UK commercial real estate market in value (USD) for all the above segments.
By Property Type | Offices |
Retail | |
Logistics | |
Others (industrial real estate, hospitality real estate, etc.) | |
By Business Model | Sales |
Rental | |
By End-user | Individuals / Households |
Corporates & SMEs | |
Others | |
By Region | England |
Wales | |
Scotland | |
Northern Ireland |
Offices |
Retail |
Logistics |
Others (industrial real estate, hospitality real estate, etc.) |
Sales |
Rental |
Individuals / Households |
Corporates & SMEs |
Others |
England |
Wales |
Scotland |
Northern Ireland |
Key Questions Answered in the Report
What is the current size of the United Kingdom commercial real estate market?
It is valued at USD 148.8 billion in 2025 and is projected to reach USD 177.4 billion by 2030.
Which property type is growing fastest in the United Kingdom commercial real estate market?
Logistics leads with a 4.7% CAGR through 2030, underpinned by e-commerce and near-shoring demand.
How will EPC regulations affect office buildings?
Assets must reach EPC-C by 2027 and EPC-B by 2030, or they risk becoming stranded, pushing owners toward costly retrofits.
Why are institutional investors focusing on build-to-rent?
BTR offers stable income, counters housing undersupply and benefits from regulatory headwinds hitting private buy-to-let landlords
Which UK region shows the highest growth outlook?
Scotland is forecast to expand at a 4.8% CAGR from 2025 to 2030 due to rising inventory and supportive buyer activity.
What impact do freeports have on the United Kingdom commercial real estate market?
Freeports provide tax incentives that attract industrial developers and occupiers, creating new logistics hubs outside traditional centres.