The latest CoStar Market Activity Tracker highlights a selective occupier market that varies by sector and location. In the office market, Manchester led the Big Six cities, Midlands logistics hubs drove a revival in big-box leasing, and regional retail and hotel markets benefited from leisure and event-led demand. However, performance remained uneven, with elevated vacancy continuing to weigh on several markets. While investment sentiment has dipped since the conflict in the Middle East, several markets have outperformed amid large transactions.
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Mid-sized office markets in the Midlands have topped the table, led by out-of-town activity in Nottingham and Coventry. Meanwhile, the Big Six regional markets have been led by Manchester, with strong net absorption as large occupiers such as Autotrader and BNY Mellon take up space. Strong leasing in Bristol, Glasgow and Edinburgh has been tempered by negative net absorption, while Birmingham’s leasing total for the first half of the year was the lowest in several years.
London has slipped towards mid-table after leading recent rankings, reflecting weaker net absorption and elevated vacancy rather than softer leasing demand. Leasing remains strong, particularly in the City Core, where several corporate lettings exceeded 100,000 square feet. Record demand is being achieved in King’s Cross and Euston, reinforcing the area’s growing AI technology cluster.
Industrial market conditions have stabilised, supported by growing demand from Amazon, Chinese occupiers and defence-related businesses, while third-party logistics firms are retaining more space, helping deliver the first positive annual net absorption since late 2023. The recovery is being led by the big-box sector, with Midlands markets dominating leasing activity. Derby has achieved record take-up, while Nottingham, Coventry and Northampton have also attracted major occupiers. In contrast, London remains under pressure, with negative net absorption and vacancy at a long-term high amid subdued occupier demand.
Across the retail markets, mid-sized regional cities have topped the rankings, led by Newcastle upon Tyne, following several fitness, leisure and experiential operators expanding in recent months. Derby remains near the top of the rankings, after several quarters of positive net absorption and a notable downward shift in vacancy. Meanwhile, strong leasing to discount and leisure occupiers across several cities in Central Scotland has boosted its ranking, although it remains weighed down by high vacancy.
Regional UK hotels have driven performance improvements in the first half of the year, as occupancy and rates improved compared to the same period a year earlier, with Scotland and Wales experiencing some of the biggest increases. Event-driven business has supported stronger performance for hotels in Glasgow, with the third quarter also expected to be strong following the Commonwealth Games. The Principality Stadium in Cardiff remains one of the UK's most important hotel demand generators, with major concerts and other events creating compression nights that allow hotels to push rates.
UK investment activity remains selective, with liquidity constraints holding back overall volumes. However, several regional markets have outperformed, driven by major transactions across all main sectors. Coventry was boosted by the £130 million Project Dawn logistics portfolio sale, while Cardiff benefited from strong demand for retail parks. In Scotland, Edinburgh and Glasgow were supported by significant office and retail deals, notably the £78 million sale of Waverley Gate.