Commercial Quarterly Examiner – office market update Q1 2026

Average UK office occupancy reached 44.2% in February, the highest level since the survey began in May 2021, but decreased to 43.9% in March according to Remit Consulting’s Return survey.

However, the numbers in Q4 2025 and Q1 2026 have consistently been above 40%.

Remit said “…many organisations have now settled into a pattern of office use that feels sustainable for both employers and employees … hybrid working is firmly embedded, but the office still plays a central role in how many businesses operate.”

This is backed up by Transport for London data, which indicates that the number of passengers visiting Zone 1 stations Monday to Friday has increased by 1% from 123 million in Q1 2025 to 125 million in Q1 2026. Even so, weekday Zone 1 station footfall remains 18% below Q1 2019 levels. Tuesdays, Wednesdays and Thursdays remain the most popular days. The underlying macro-economic drivers of office demand are weakening. Office-based economic output¹ decreased very slightly by -0.03% in Q4 2025 and the annual rate of growth decreased to 0.92% from 1.46% in Q3 and 2.7% in Q4 2024.

^{1 The sum of economic output (GVA) produced by office based industry sectors.}

Central London offices: Occupational view

• Grade A office space availability is limited in the West End, particularly Mayfair and St James’s. There is also dwindling supply in the City of London, as pre-letting of best in class offices continues at pace. Such is demand there is competing bidding driving rental growth and we predict a ‘tipping point’ into the Grade B and fringe markets.
• The occupational footprint of AI companies is growing, reaching record levels as the year has progressed. Interestingly these AI occupiers are clustering along the Elizabeth Line, with
  3 AI sector-led deals highlighted below.

Central London office availability decreased in Q1 2026 by -6.9% to 28.4 million sf which represents 21 months’ supply at the post-Covid average rate of take-up. The occupational market for the very best buildings typically called “Grade A” is tighter. Availability for the best office space decreased by -8.4% in Q1 to 5.3 million sf representing 19 months’ supply.

In the City office market, the availability of Grade A office space in Q1 decreased by – 6.8% to 1.53 million sf representing 12 months’ supply. In the West End, the availability of Grade A trophy office space in Q1 decreased by – 14.7%. Although there is 677,000 sf of this best-in-class space available across all West End sub-markets only 15,700sf or 2% of this space is in the core Mayfair and St. James’s submarkets. Supply is more plentiful in Victoria and Noho.

All office take-up decreased by -32.6% in Q1 to 3.02 million sf from 4.479 million sf in Q4 2025. This was the lowest quarterly total since mid-2021 when the market was recovering from the Covid lockdowns. Only the City Fringe and West End markets showed any resilience and posted q-on-q increases in take-up.

Take-up of Grade A space in Q1 increased 31% to 856,000 sf from 652,000 sf in Q4 2025. Leasing activity improved in all sub-markets except the City and Docklands. In the City Grade A take-up fell -26% to 330,000 sf including British Land and GIC Real Estate’s pre-letting of 267,000sf of sustainable space at 8 Exchange Square for 21 years to global law firm, Herbert Smith Freehills Kramer, to consolidate their London headquarters office. The building is located adjacent to Liverpool Street Station within the Broadgate office campus originally developed in the mid-
1980s. It will provide 50,000 sf of amenities including rooftop terraces, cycling facilities, wellness/leisure space, gym and health club and premium client reception areas.

In the West End, Grade A take-up increased more than threefold to 150,000sf in the first quarter, albeit off a low base of just 47,000sf in Q4 2025. Most of this space was let by Derwent London at the Network Building, 10 Howland Street in Fitzrovia near Tottenham Court Road for 15 years at £14.1 million a year. The building is a sustainability-led development comprising 136,000sf on ten floors with terraces, end-of-trip facilities, cycle storage and communal spaces.

The London office market has begun to reap the benefits of the rapid rise in the use of artificial intelligence (AI). The counterparty to Derwent London’s letting at the Network Building was Databricks, a US-based data, analytics and
artificial intelligence software company. In April, Anthropic committed to 158,000 sf at One Triton Square and OpenAI announced its first permanent London office, taking around 77,000 sf at Regent Quarter in King’s Cross.

Across the Central London office market, an average 858,000 sf of new space has been delivered every quarter over the last 10 years. In Q1 development completions totalled 1.6 million sf. In the West End 323,000 sf of new space was delivered In Noho and Victoria, whilst City and City Fringe completions totalled 878,000sf. New construction starts in Q1 amounted to 1.16 million sf across the West End, Midtown and Southbank compared to average starts of 801,000 sf over the last 10 years. A further 8.2 million sf remains under construction. More than 60% of this new space is in the City and Midtown with just 1 million sf in the West End.

Central London offices: Investment view

• The Central London office market saw a modest improvement in Q1 2026, with capital value growth turning positive. The West End continues to outperform but MRV growth is weakening.
• Seasonal effects meant that the preliminary estimate of Investment activity in Q1 2026 was always going to be lower than in Q4 2025 but there is sufficient liquidity and demand for prime assets.

The Central London office market improved slightly in Q1. Capital value growth as measured by MSCI increased from -0.127% in Q4 2025 to +0.13% in Q1. Year-on-year capital value growth fell to 2.42% in March from 2.67% in December last year. The Q4 2025 RICS UK Commercial Property Monitor notes that prime office capital values in London are projected to increase by around 0.9% in 2026, compared with expectations for growth of 2.8% in Q4. The outlook for prime London offices nevertheless remains stronger than the UK wide picture.

The West End office market continues to be the main driving force behind the capital’s office market. Capital growth increased to 0.46% in Q1 from 0.14% in Q4 2025. City office valuations fell by-0.98% in Q4 and the decline continued in Q1 as they fell by a further -0.72%. Year-on-year capital growth in the West End of 4.31% but the support offered by MRV growth decreased to 6.50% from 8.38% in Q4 2025 y-on-y. City office capital values fell by -1.80% y-on-y in Q1 2025 whilst rental growth decreased to 2.39% from 2.90% in Q4 2025.

The number of Central London office investment transactions in Q1 decreased to 41 from 64 in Q4 2025 and the value of these transactions decreased by 31.7% from £2.559 billion in Q4 2025 to £1.747 billion in Q1. Preliminary estimates suggest that the value of transactions in Q1 2026 was 5.6% higher than Q1 2025.

In the City Fringe, M&G Real Estate sold the Fruit and Wool Exchange, Brushfield Street to Norges Bank Investment Management for £300 million (£879 psf). The property was 100% let to law firm Ashurst, CME Group, TriOptima and others and contains 341,000 sf. It was developed in 2018 retaining the 1928 brick and Portland stone in Spitalfields adjoining Old Spitalfields Market.

In the West End, Oval Real Estate, a London based investment, asset management and development business, traded 14 George Street in a core Mayfair location near to Bond Street tube station for £173 million (£3,402 psf) to a private overseas investor having previously acquired it from Chinese Estates Group in 2024 for £125 million. The building which contains 51,800 sf on four floors behind a retained Georgian façade was originally developed in 2011 and is occupied by Antin Infrastructure Partners, Trafigura, Ellerman Investments and Aleph Capital.

Rest of UK offices: Occupational view

• Availability decreased across both the South East and Rest of UK office markets in Q1 but there is still enough supply to satisfy four years of average demand.
• Buildings targeting bio-tech, life science and healthcare tech users are characteristic of the current development pipeline.

Office availability in the South East decreased for the third consecutive quarter by -2.5% in Q1 and fell by -2.3% y-o-y, representing 47 months supply at the post-Covid average rate of take-up. Availability across all Rest of UK office markets outside London and the South East decreased by -0.5 % in Q1 but increased by 2.5% year-on-year also representing more than four years of supply.

South East Grade A availability decreased by -4.2% in Q1 and by -44.4% y-o-y and there is now 20 months of supply. Three months earlier there was 31 months’ supply of space. Rest of UK Grade A office availability decreased by -6.7% in Q1 and -1.1% y-on-y and there is now 25 months supply compared to 31 months in Q4 2025.

At the end of Q1 the vacancy rate across the UK’s largest regional office markets decreased from 12.2% in Q4 2025 to 11.8% and ranged between 9% in Edinburgh and 13.1%% in Manchester. However, the vacancy rate for Grade A space across all “Big 6” centres is 1.4%. Overall vacancy rates across the key South Eastern centres decreased from 7.6% in Q4 2025 to 7.1% but limited development activity means there is no available Grade A space in Cambridge or Milton Keynes and the Grade A availability in the Thames Valley is 1.0%.

Rental growth in the ‘big 6’ markets decreased slightly to 3.0% in the year to March from 3.1% in the year to December. Bristol is the strongest regional office market, and y-o-y rental growth has increased from 4.3% in December to 4.6% in March. March y-on-y MRV growth is 4.4% in Leeds, 2.6% in Manchester bur -3.1% in
Glasgow. South East office market rental value growth has increased from 1.1% y-o-y in Q4 2025 to 1.6% in Q1.

In the South East and Rest of UK office markets four developments were completed in Q1 providing 303,000 sf. Two of these buildings providing 301,000 sf are classified as “Grade A”. The South East office development pipeline
has 26 buildings expected to complete in 2026 providing 2.181 million sf, 51% of which has been pre-let. Most of this pipeline is centred on the Oxford and Cambridge markets where 2.434 million sf is due to be delivered in the next two years. Following pre-lets but only half of this space is available to let.

The largest of these schemes is a net zero development on Oxford Business Park being marketed as “Trinity by Breakthrough”. The building has been designed primarily for biotech and life-science occupiers and on completion will provide 210,000 sf of lab, R&D and office space. The distinctive design includes a curved green terracotta façade and integrated living walls as well as the usual wellness and fitness facilities, café and collaboration spaces, cycle hub and shower facilities, extensive landscaped/public realm improvements and high-spec lab infrastructure with enhanced servicing and vibration controls. The entire building remains available to let in configurations from 4,000 sf up to 214,000 sf.

At the end of Q1, the Big 6 development pipeline had grown to 3.281 million sf in 12 buildings. The largest scheme in the pipeline is a locally controversial major new UK 1.4 million sf headquarters campus for US healthcare software company Epic Systems, planned on 90 acres southwest of Bristol Airport. Bristol is increasingly finding favour as a centre for international health-tech firms. Epic itself is one of the world’s largest electronic medical records software companies, with major NHS contracts including Cambridge University Hospitals and other UK trusts. In principle planning consent has been granted and the scheme is unlikely to deliver before 2013.

Rest of UK offices: Investment market

• Performance in the UK’s major regional office investment markets continues to strengthen but remains underwhelming.
• Manchester continues to be the main target for investors seeking exposure to regional offices.

The average total return performance across all “Big 6” centres increased to 1.2% in Q1 from 0.9% in Q4 2025 as capital growth improved to -0.3% from -0.5% in Q4. “Big 6” office total returns for the year to March have increased to 3.3% from 2.9% in the year to December but are still under-performing March’s All Property y-on-y performance of 5.6%.

The UK’s major regional office investment markets strengthened in the fourth quarter of last year when investment volumes increased by 48% to £246 million from £168 million in Q3 but were nevertheless -31% below the post-pandemic quarterly average of £355 million. Preliminary estimates suggest that investment volumes in Q1 grew by 74% to £429 million. As usual the latest numbers for Q1 are likely to be revised in the coming months. Manchester was the destination for 44% of investment in the “Big 6” markets in Q4 as investors bought 13 assets worth £179 million. The flow of capital into Manchester continued in Q1 when a further five assets were exchanged for £143 million.

Investment volumes in the South East increased in Q4 2025, by an astonishing 322% or more than fourfold to £1.124 billion from £266 million in Q3. But preliminary estimates suggest that investment volumes in Q1 fell back -86% to £154 million. In Oxford, investment volumes reached £921 million in six transactions and in the Thames Valley 18 transactions accounted for £236 million.

The BT pension Fund sold 4 Angel Square, part of the NOMA regeneration district in north Manchester city centre around Victoria Station and Angel Meadow to Bank of New York for £114million. The building is operationally net zero and contains 197,000 sf of offices together with roof terrace, business lounge, wellness facilities and 212 cycle spaces. The anchor tenant is BNY (formerly BNY Mellon) who are re-locating staff from two existing offices in Manchester.

In the Thames Valley, Investment Manager, ATLAND, acquired One Forbury Square in Reading for £15.0 million from Longmead Capital. The building comprising 36,000 sf over ground and four upper floors, was developed in the early 2000s and comprehensively refurbished in 2020 to Grade A standard. ATLAND is a French Real Estate investment manager. The purchase was made on behalf of its flagship fund, Épargne Pierre with a market capitalisation of 2.7 billion euros.

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