United Kingdom Office Real Estate Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Market Overview

The Office Real Estate Market in the United Kingdom is expected to grow at a CAGR of more than 6% during the forecast period (2022-2027). 

Improving economic data over the past few months, followed by the reopening of the economy, has helped lift the mood in the office real estate sector. Leasing momentum is back as most offices are safely implementing Return-to-Work. Inquiries have picked up around city centers and so has the leasing activity. The IT, ITeS sectors are among the prime drivers of overall leasing activity in the top cities, and bulk hiring by these firms will influence demand for large quality office spaces.

COVID-19 has mixed impact on the Office Real Estate market in the United Kingdom including its services. Real estate has been badly hit by the COVID-19 pandemic with a sharp decline in values across all markets and sectors. The office Real Estate take-up was below normal due to flexibility given to employees (Work from Home) by the companies. The lockdown measures have forced millions of people to work from home and on the other hand, the short-term nature of contracts has left offices with very low occupancy across the United Kingdom.

Confidence in the United Kingdom office property market had already been knocked by the uncertainty surrounding Brexit. Although Brexit has been sharply put into perspective, leaving the European Union has not helped the United Kingdom to address severe labor and material shortages as well as crippling supply chain issues. Occupiers, for instance, are increasingly renewing their office spaces since the pandemic started. Occupiers are looking to be in new-generation offices with modern amenities with a focus on health and wellness.

Scope of the Report

Office real estate is the construction of buildings for leasing and selling purposes to companies from different sectors. This report offers a complete analysis of the United Kingdom office real estate market, including a market overview, market size estimation for key segments and emerging trends by segments, and market dynamics. The report also offers the impact of COVID-19 on the market.

United Kingdom Office Real Estate Market is segmented By Sector (Information Technology (IT and ITES), Manufacturing, BFSI (Banking, Financial Services, and Insurance), Consulting, and Other Services). The report offers market size and forecasts in Values (USD billion) for all the above segments.

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Key Market Trends

Declining Vacancy Rates and Increasing Rents of Office Spaces in London

There was a resurgence in demand in the Greater London & South East office market in 2021, after the weaker take-up recorded in 2020 as a consequence of lockdowns. Take-up reached 3.5 million sq ft, which reflected a 46% and 12% increase in the take-up recorded in 2020 and 2019, respectively. The transactional activity was only 2% below the pre-COVID-19, illustrating the healthy levels of occupier activity in the market. The Western Sector was the most active geographical region, accounting for 45% of total take-up recorded in 2021.

The market received a confidence boost, with several large corporations committing their long-term future to the region. This included Unilever, ITV, and Intercontinental Hotels Group, which all leased over 50,000 sq ft in 2021. There were ten deals recorded over 50,000 sq ft, which was the highest total since 2018 and the second highest quantum in the last five years. Notable transactions in Q4 2021 included Skanska leasing 67,000 sq ft at Leavesden Park, Watford.

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