Although investment volumes in the first half of 2025 were 4% lower than the same period in 2024, over £600 million was placed under offer in the second quarter, signalling a shift in sentiment.

This recovery is already visible in central London, particularly in the City, where investment volumes rose 98% year-on-year. A similar trend is expected across regional markets, supported by strong fundamentals and improving occupational performance. Oxford Economics forecast another base rate cut before 2026, which could further boost investor appetite and drive increased turnover.

Pricing gap widens between prime and secondary assets

The disconnect between occupational and investment markets remains pronounced, especially in pricing. MSCI’s monthly Capital Growth Indexes show office values in the South East and regional office markets (everything outside of London and the South East) have dropped by 39% since June 2022. However, the rate of decline is slowing, with only 2% and 1% falls respectively since the start of 2025. This suggests price discovery is beginning to take hold.

It is important to note that MSCI’s data includes all office grades, including poor quality offices where values have fallen significantly compared to more resilient prime offices, which has skewed reported values. This growing divide between prime and secondary assets has distorted market perception in what is now a more nuanced landscape. Compared to other asset classes, regional offices remain competitively priced. According to our research, only shopping centres and leisure parks currently offer softer yields.

Occupier market shows resilience and rental growth

The occupational market continues to demonstrate resilience. In Greater London and the South East (excluding central London), H1 2025 take-up reached 1.5 million sq ft, 10% higher than H1 2024 and 16% above the five-year average - the strongest first-half performance in three years.

Regional city markets also performed well, with the ‘Big Six’ exceeding the five-year average by 5%. Manchester, Edinburgh and Glasgow all outperformed, with Manchester’s take-up 31% above its five-year average, the highest H1 total since 2020.

Despite sluggish economic growth, prime rental values have risen, driven by limited supply. The Big Six have delivered an average of 5% annual prime headline rental growth over the past three years. In Q2, Bristol achieved a record headline rent of £49 per sq ft, with further growth expected this year.

Large occupier demand persists amid supply constraints

Despite strong demand, the development pipeline remains constrained. Viability challenges and low developer confidence are limiting new stock delivery. Only 400,000 sq ft of new-build space is expected across the Big Six, while availability continues to fall. In Greater London and the South East, supply is forecast to reach its lowest recorded level by the end of 2025.

Demand for larger spaces remains robust. Requirements for units over 20,000 sq ft now account for 44% of total demand, underscoring the importance of large-scale occupiers in driving market activity.

Refurbishments step in to meet demand

With new-build delivery slowing, landlords are increasingly adopting repositioning strategies to meet occupier expectations around quality, ESG compliance and flexibility. Refurbishments are filling the gap: 84% of speculative office space expected across the Big Six over the next three years will come from refurbished stock, reflecting the ongoing impact of development viability challenges.

Market set for repricing and recovery

The demand/supply imbalance continues to drive rental growth, a trend likely to persist through to 2026. With fewer options and increased competition for best-in-class space, refurbished offices are well-positioned to outperform legacy stock. Decisive investors can take advantage of current pricing levels and potentially realise enhanced returns.

Further information

Contact James Emans or James Evans

Market in Minutes: UK Regional Office Investment Market Watch