The Big Nine
Quarterly review of take-up in the major regional office occupier markets in the UK.
Occupier demand for regional offices continues to display resilience with Big Nine take-up reaching 2.1m sq ft in Q1 2025, in line with the 10-year quarterly average and the strongest Q1 since 2018. Three deals on excess of 100,000 sq ft provided a boost to demand, the largest of which was the Department for Work and Pensions’ 173,000 sq ft pre-let at Reuben Brothers’ 1 Pilgrim Place in Newcastle.
DWP’s pre-let, together with Network Rail’s 109,000 sq ft owner occupier deal at Princes Exchange in Leeds contributed to the Government & Services sector accounting for a quarter of Q1 take-up.
The out-of-town market saw increased momentum with take-up reaching 809,825 sq ft, its highest level since Q3 2021. Five deals in excess of 25,000 sq ft completed in the first quarter, up on the average of four seen per quarter. As city centre locations continue to suffer from a chronic lack of Grade A space, some occupiers are beginning to look beyond in-town locations in the search of larger, more flexible and cost-effective options.
Indeed, city centre prime rents continue to experience rental growth, in Q1 prime rents across the Big Nine increased 2% q-o-q to £39.53 per sq ft, reflecting annual growth of 6%. Glasgow and Leeds reported the largest quarterly rental hikes of 5% and 6%, respectively.
Downward pressure on rent frees is starting to emerge averaging 19 months on a 10-year lease across the Big Nine markets, down from 21 months 12 months ago.
Occupier preference for new and refurbished space fuels the flight to quality with 48% of 2025 development completions already pre-let. We are seeing a growing preference for fitted space with good wellness and sustainability credentials.
The uptick in investment activity experienced at the end of 2024 failed to continue into 2025 with investment volumes reaching £227 million in the first quarter. This is 54% down on Q4 2024 and 62% below the 10-year quarterly average. More encouragingly however, the number of transactions recorded gained momentum with 33 recorded, up on 21 seen per quarter on average over the last two years.
Just one transaction over £25m completed; Pontegadea’s £75m purchase of Capital Square, 62 Morrison Street, Edinburgh. The transaction marks the Spanish investors second prime office transaction in the Scottish capital in under a year, highlighting the growing preference for the best buildings, in central locations with excellent sustainability credentials.
As a result, overseas investors have boosted their share of investment activity over the last 12 months (Apr ’24 – Mar ’25) accounting for 41%, up on the 34% share over the previous 12 month period (Apr ’23 – Mar ’24). Conversely, UK Institutions have decreased their share of investment from 18% to 9% over the two 12 month periods.
Whilst geopolitical and economic uncertainty remains elevated, the relative value offered by regional offices compared with other asset classes, together with a robust occupier market and strong rental growth prospects, boosted by a lack of supply, underpin the case for increased confidence in the UK office sector in 2025.
With UK inflation slowing for a second consecutive month in March to 2.6% and pressure mounting on the BOE to support economic growth, the likelihood of base rate cuts sooner have increased. This spells good news for investors waiting on the sidelines.
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