Resilient Q1 for office market – upturn in confidence anticipated for Q2

The Big Nine regional office markets have shown resilience in the first quarter of 2025, according to data from global real estate advisor Avison Young.

As seen in the firm’s upcoming Big Nine report, which charts regional office activity from nine UK cities outside London (Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle), take-up has reached 2.1 million sq ft, in line with the 10-year quarterly average.

Newcastle had the quarter’s largest deal, DWP’s 170,000 sq ft pre-let at 1 Pilgrim Place, a development with more than 400,000 sq ft of Grade A space. The deal was facilitated by Avison Young.

Auto Trader signed on for a 130,000 sq ft pre-let at 3 Circle Square, Manchester, and Network Rail has agreed to an owner-occupier deal at Princes Exchange, Leeds for 109,000 sq ft.

As a result of landmark deals from DWP and Network Rail, the Government and services industry has dominated Q1 office deals, taking around a 25% share.

Quarter one has also seen a strong uptick in out-of-town demand, boosted by five deals in excess of 25,000 sq ft, the highest level of quarterly take-up since Q3 2021.

Manufacturing and Industry takes the largest share of out-of-town deals at 18%, with EDF signing on for 78,284 sq ft in Bristol.

The demand for out-of-town space could be driven by cost efficiency, as prime city rents continue to rise, or due to demand for larger, more flexible spaces.

Across the nine regional markets, prime rental growth rose quarter-on-quarter by two per cent to £39.53 per sq ft, reflecting annual growth of six per cent.

Glasgow (5.1%) and Leeds (6.3%) saw the most significant rental increases to £41.50 per sq ft and £42.50 per sq ft, respectively.

Bristol remains the city with the highest headline rent at £48 per sq ft, followed by Manchester at £45 per sq ft.

While Edinburgh, Glasgow, Leeds and Liverpool all saw rental growth quarter-on-quarter, all of these markets are severely constrained in terms of new-build developments completing in 2025.

The average rent-free period is beginning to decrease, from 21 months last year to 19 months on a typical 10-year lease, suggesting that demand for office space regionally is increasing, with landlords no longer needing to offer a longer rent-free incentive to secure tenants.

Demand for new and refurbished space is on the rise, with occupiers seeking high quality sustainable spaces, with 48% of 2025 development completions already pre-let. The market is leaning towards ready-to-go fitted offices, with good wellness and sustainability credentials.

Paul Broad, managing director of Avison Young’s national offices team, said: “It’s encouraging to see that regional office markets are holding steady, showcasing stability and resilience in what is otherwise a turbulent economic outlook.

“There is a clear shift towards quality space, with occupiers seeking well-located offices, fitted out with sustainability in mind, with almost half of new developments already pre-let.

“It’s also great to see out-of-town markets continuing to gain momentum, as occupiers look for a cost effective, accessible alternative to city centre rent hikes.”

He added: “We can really see confidence returning to the regional office markets, and we expect this to continue into Q2 and beyond.”