People focused on the UK's regional office markets will look back on 2025 as the year that headline rents reached £50 per square foot, with Bristol first past the post.
Other cities that broke their rent records included Birmingham and Leeds, with law firms and professional finance firms displaying a willingness to pay top dollar at top schemes.
Limited prime supply, coupled with a move towards greener, amenity-rich workspaces all played their part in rising rents, in addition to viability challenges, which made new starts rarer than a red-nosed reindeer in 2025.
On the investment side, volumes are yet to recover, with the sector going through a considerable correction since COVID. But there is optimism for 2026, with anecdotal evidence of increased office viewings after the Budget and a circa £100 million-plus Manchester deal in Santa's workshop.
CoStar News speaks with industry experts to review the year and assess how the regional offices sector performed across both leasing and investment. They also make predictions for the year ahead.
Diminishing prime stock
Giles Tebbitts, director of market analytics, Manchester, at CoStar says the vacancy rate across the Big Six office markets stabilised in 2025, as net absorption, the change in occupied space, was mildly positive after "substantial demand losses" since 2020.
"With several completions this year, such as Three Chamberlain Square and 3 Circle Square, the supply pipeline has slowed, which has also helped to steady the vacancy rate. This currently sits at 9.7%, similar to a year ago, albeit a 10-year high," Tebbitts says.
Bristol, he notes, led the Big Six occupier market this year, after the completion of three of its largest lettings since 2021, Hargreaves Lansdown at Welcome Building, Rolls-Royce at 100 Bristol Business Park and EDF at 1000 Aztec West, all over 70,000 square feet. It meant leasing in the city reached its highest total for at least six years.
Tebbitts adds: "Vacancy rates in Edinburgh and Leeds have stabilised due to a combination of improved net absorption and slowing deliveries. The strongest development pipeline is in Manchester, although vacancy has been balanced by positive net absorption. Meanwhile, Birmingham and Glasgow have witnessed more significant, albeit improved, demand losses."
Cautious investor sentiment, elevated construction costs and high vacancy rates, he says, have "kept new office construction starts muted" across the Big Six. Following several years of declining activity, from over 7 million square feet in 2019, Tebbitts adds space under construction has reached a long-term low of 1.5 million square feet.
"There is now only a handful of substantial schemes under construction, including The Republic in Manchester, The Beorma Tower in Birmingham and Kellstone at Aire Park in Leeds," Tebbitts says.
"Consequently, refurbishment activity has increased, with schemes such as Pall Mall in Manchester, 19 Cornwall Street in Birmingham and in Glasgow, where there is a lack of new supply, Lucent and Aurora have been setting new prime rents."
Tebbitts also says that a "diminishing supply of the best space in the city centres" has caused prime rental growth to be "significantly stronger than average rental growth across the cities", with Birketts paying £50 per square foot for additional space at EQ.
He adds: "CoStar data indicates that the gap between 1-4-star property (secondary) market asking rents and 5-star (prime) rents reached a record £12 per square foot in December. Average secondary rents across the Big Six central business districts are currently 68% of prime rents, down from 73% in 2020."
Expansion appetite
Josh Arnold, regional office market research lead at BNP Paribas Real Estate, tells CoStar News that the regional offices market displayed a level of resilience that "surprised many" despite a challenging economic backdrop.
Arnold says demand has "remained robust", with take-up in 2025 expected to exceed the short-term five-year annual average and finish just below the longer-term trend. He also points to the chance of a late flurry of deals, with several larger requirements already completing or due to be announced in the fourth quarter.
The offices expert argues that construction activity remains constrained and is having a direct impact on the regional leasing market and rents. "New-build supply continues to trend downwards, pushing rental growth upward across the Big 10 cities.
"Professional services firms have led the charge this year, both in terms of activity and in setting new rental benchmarks, as we’ve seen with deals such as Eversheds in Leeds, Birketts in Bristol, Forvis Mazars in Birmingham amongst others."
Some have suggested that 2025 was the year that the regions, as well as London markets, show evidence of having shaken off their Covid hangover, with many firms increasing their footprints and having to dip back into the market for more space.
Simon Williams, head of national markets at BNP Paribas Real Estate, says he has seen more businesses looking at expansion again, with renewed confidence, albeit cautious, "feeding through into active briefs across the regions".
He adds that "quality remains the clear differentiator" for tenants, arguing firms have become "laser-focused on prime, future-fit space in well-connected city centre locations". He adds: "With new supply so thin [on the ground], we’ve seen landlords with well-timed refurbishments outperform the wider market.
"And, as the pipeline remains restricted and investors globally search for yield and stable income growth amidst a volatile macroeconomic backdrop, that flight to quality is only going to become more pronounced. The practical reality is that choice is tightening, and tenants are reacting accordingly."
Arnold agrees that the refurbishment market has become "one of the most compelling opportunities" for investors. He says: "With new-build supply very limited, the regions have a huge amount of potential locked up in secondary stock.
"Landlords who can commit the capital expenditure to reposition existing assets can capitalise on strong rental outcomes. As refurbishments generally require a shorter build period, reduced embodied carbon and often less expenditure than new-builds, I expect this to accelerate through 2026."
Looking ahead to next year, Williams says more tenants with long-term requirements could look to buy the buildings they occupy "in order to future proof their costs in terms of potential further rental inflation".
There are already examples of this already, with US banking giant BNY Mellon going under offer to buy its 4 Angel Square offices in Manchester this month. It was put on the block by Federated Hermes earlier in the year for circa £120 million, reflecting a 6.5% yield.
Williams adds: "Choice is going to get tighter before it gets better. We simply aren’t seeing enough new developments starting on site to alter the supply picture in the near term. Occupiers with lease events on the horizon are already looking much earlier than they did pre-pandemic, and that trend is only going to intensify."
His colleague Arnold suggests that the squeeze on prime office space looks set to persist into next year due to limited new supply and stable demand, maintaining upward pressure on rents. "As a result, we expect occupiers with lease events on the horizon to continue looking far in advance to secure preferred space," he says.
Considering costs
Cushman & Wakefield head of national office agency Charles Dady argues a lack of Grade A supply is one of the major drivers behind falling take-up in the regions this year, alongside cost control.
His colleague, Josh Woolnough, who is head of national offices research, adds that some 1.6 million square feet of offices across the big five markets the adviser tracks – Birmingham, Bristol, Edinburgh, Leeds and Manchester – will need to be leased by the end of the year to match last year's volumes.
"If it's not there, it can't be taken up," Dady says. "That sounds like a classic excuse for falling take-up, blaming it on limited supply, but I really do think that some of the markets out there are now so starved of supply that [this] is actually happening and occupiers aren't moving."
He adds: "Occupiers will always find a way around it if the right option isn't there, so I think it is a bit chicken and egg. That's where we're getting to, particularly in markets like Edinburgh where [supply] is particularly acute and we could say the same in Bristol to a degree."
Dady highlights that limited Grade A supply in the regions has led to more regears this year, with economic headwinds also having an impact, with firms watching their spending more closely. "We've seen in quite a lot of our occupier-led research that cost control has risen to the top of the agenda, particularly capital expenditure," he adds.
He says he has been surprised by the amount of public sector activity in 2025, with the Government Property Agency securing a number of major deals that have helped leasing volumes, including a 173,245-square-foot prelet at the Reuben Brothers' Pilgrim Place 1 building in Newcastle.
"We really thought that would be put on hold for every reason: a new government, a spending review, a Budget, an acute black hole to be plugged. But it has been far from it and we've actually seen the opposite, with HMRC, DWP as well as Defence [deals]."
Dady and Woolnough also note that some firms who recently secured moves or shed space in the aftermath of the pandemic have had to dip their toe back in the water again, with staff returning to more regular office use.
"Perhaps, post-COVID, companies downsized too much and now as people are coming back into the office and as return to work mandates are being applied across regions hubs, firms are realising that they need more desks, they need more space, and they are expanding where they are moving," Woolnough says.
Dady says he is feeling optimistic about the beginning of next year, with the Budget behind us and companies looking more seriously at securing moves to prime scheme.
"I don't know if it's just because it is the end of the year and we are all feeling a bit Christmassy, but I think it is a fair reflection that things are feeling more positive.
"I think the back-to-work mandate is really positive, the government spending ... and the occupiers we are talking to are all wanting to get on with it and are setting up viewing tours.
"I'm not suggesting there's going to be a take=off or a boom but definitely glass-half-full for next year in the regional markets."
Buoyant Bristol
Toby Pentecost, senior vice-president and co-head of Trammell Crow Company’s UK office development team, agrees that occupiers in today's market know what they want, acting with urgency to secure the best spaces this year.
Pentecost says Trammell Crow Company enjoyed a "brilliant year" in Bristol, signing DAC Beachcroft, Unite Students and Hargreaves Lansdown at its 210,000-square-foot Welcome Building in Temple Quay. Those deals brought the building to 77% let within seven months of completing.
"I do think there has been a bit of a push around return to work, but I don't think the occupational side has been driven by tremendous growth or consolidation - it would be really nice to have that. I think take-up [has been led by] businesses demanding better quality space."
Despite a number of larger deals in the regions this year, Pentecost notes that the market is "not vastly deep" for occupiers, with top-class space "on the thin side". He says this is helping to kick on regional rents, with the group confident of securing rents comfortably in the £50s at Welcome Building.
He says talk of rents in the late £50s and even early £60s at schemes in the city is encouraging the developer to look at doing more there and in other cities. But he warns that the occupational success it has experienced in Bristol has not yet been met with motivated capital on the investment side of the market.
“While leasing activity has shown strong momentum, particularly for best-in-class space, investment appetite hasn’t fully caught up. There’s still a noticeable lag between occupational demand and the depth of capital willing to commit at scale."
He adds: "Very basic supply and demand tells you rents should go up, so we are excited for the prospect of more rental growth and we know that construction cost increases are much less volatile right now and that the impact of highly-volatile utilities pricing is demonstrably reduced.
"It really is all about being able to demonstrate confidence that there is high demand for offices and that's what will attract the capital. So it is a bit of a chicken and egg, if you can show that people want offices and that shows up in the rents, that income growth potential will attract the capital to come back and then we will be able to build more.
"So we need to get ourselves into that space where there is a defensible baseline in what offices are worth to our customers. If someone is going to pay £60 per square foot for an office in Bristol or Manchester, investors should come back because that is a reliable place at which land prices become economically viable and build outs become logical."
Dan Rees, senior vice-president and co-head of Trammell Crow Company’s UK office development team, adds that building momentum in the London office investment market is a positive sign for the regions, with interest promising to spill out into the best cities and office schemes around the UK.
"Investors who have been able to buy at a greater than 6% net initial yield in London and now that is tightening to 5.5% or 5.25%, will eventually says, 'well, we need that 6%', so let's go to Manchester or Bristol where new supply is close to zero.
"That takes time, but you can't deny that the recovery in the capital markets in London is well on its way to recovery and that should carry over."
Structural revaluation
Laura Wilson Brown, head of office asset management for CBRE Investment Management's UK direct real estate strategies, tells CoStar News that it has been an important year for the regional office market, where there was strong leasing activity.
She says market-defining office investment deals in the regions have been "quite thin" on the ground, with "stabilisation" being the main theme.
"It does feel in the second half of the year that there has been more stabilisation around the yield side for the best regional offices because I think, as has been well publicised, the office market as a whole has gone through quite a structural revaluation over the last three to five years.
"This year, in my opinion, has been the one where it has begun to stabilise. One case study I would use is a Manchester building we sold, 201 Deansgate. That was well competed for in the market and there was good liquidity for it. I think that gives an example of there being a potential stabilisation around the outward yield shift."
She adds: "Over the last few years, valuers have found it quite hard to set the yields because there hasn't been enough market evidence. But, from what I have seen this year, I am definitely tracking more stable and increasing investor demand for regional offices."
Wilson-Brown says pricing for the best "core offices" has reached a level where certain investors "can see fair value again", relative to long-run yields, with those investors being attracted by the income return in the regional office sector.
She also says the Budget, which was more or less as expected, appears to have helped with this stabilisation, although it is too early to make any firm conclusions.
In regard to investors who have been most active, CBRE IM's head of office asset management says French funds have continued to be dominant in the regional investment market, while Israeli capital has also become more active over the last year.
"My understanding on the Israeli capital is that they generally tend to look for yield, so they come in at a particular price point where regional office yields have got to. But also I think there is a need in some instances to redeploy capital from Israel and into other investable locations.
"Alongside that there are some high-net-worth buyers and we are increasingly seeing capital being raised from other areas targeting regional offices because of the yield play."
Viability knock-back
Viability issues have come to the forefront of the minds of developers and landlords this year, presenting challenges around making new-build and refurbishment projects stack up. But Wilson Brown says she feels like this is changing.
She says: "Now that you've got the regional office yield for the best offices stabilising, that should help support capital expenditure. The rent part of the equation comes into it as well. You've seen rents grow because they have needed to grow [with no] space for occupiers to take up.
"So [occupiers] have been fighting to pay more to get the best space and I think that is only going to continue because there has been this lack of supply because of the feasibility."
She adds: "That should also help the equation and encourage more development. But there is always going to be a lag because, if those appraisals are only beginning to stack up, say they stack up next year – and most refurbs of scale take at least two years to get off the ground – then you are not going to see that supply hit the market three years or so hence."
Wilson Brown argues that offices are still, to a degree, having to "earn the journey" of those working in them, although financial services firms and increasingly technology firms have been mandating staff more enthusiastically to a five-day return.
She says she is feeling more confident about the chances of regional offices next year as long as there are no surprises. "With the Budget out the way, I think we can see a landscape towards lower interest rates which should support all things office, and I do think the supply-demand dynamics for best-in-class buildings are at the right level to benefit rents growing and more stable yields."