The UK’s office market may have reached a turning point, with vacancy rates falling for the first time since the start of the pandemic. New data reveals a modest but symbolically significant drop in the amount of empty office space, suggesting that businesses are beginning to reclaim the desks they once deserted.
According to commercial property data provider CoStar, the national office vacancy rate edged down to 8.6 per cent at the end of March, from 8.7 per cent at the start of the year. Though the decline is small, it marks the first fall in availability since 2020, when the UK entered its first Covid lockdown and vacancy stood at just 4.6 per cent.
By the end of 2024, vacancy had nearly doubled to 9 per cent, with firms slashing their total office footprint by a staggering 41 million sq ft—the equivalent of 82 fully-let Gherkin buildings. The recent reversal suggests that trend may be slowing or even beginning to reverse.
The first quarter of 2025 saw companies move into one million sq ft more office space than they exited. Half of the UK’s largest towns and cities registered falling vacancy rates, including London, Manchester, Sheffield and Cambridge.
Mark Stansfield, senior director of UK analytics at CoStar, said the data implies that most companies have now completed the “rightsizing” of their office estates. “There was a clear pattern during the early pandemic years of businesses reducing their space. But we’re now seeing some of those same companies take more space again.”
In London, HSBC is reportedly seeking overflow office space near its new HQ by St Paul’s Cathedral, concerned that it may have trimmed back too far. Magic Circle law firm Linklaters, which had planned to occupy 14 floors in its new headquarters, has now taken all 17. BP and Virgin Media have also expanded into additional space in their buildings.
But the shift is not confined to the capital. In Manchester, Auto Trader signed the largest office lease outside London this year, taking 137,000 sq ft at 3 Circle Square—double the size of its previous premises.
Several major employers, including Amazon, Boots, Dell and many American banks, have mandated five-day office returns for staff. Data from Remit Consulting shows UK offices are now busier than at any point since the first lockdown, with average occupancy climbing to 38 per cent, still below the pre-pandemic average of 60 per cent.
A “flight to quality” continues to dominate the market, with companies prioritising modern, energy-efficient buildings. Between 2020 and 2024, tenants vacated a net 57 million sq ft of older “secondary” office space, while net demand for top-tier “prime” buildings rose by 16 million sq ft.
The fall in vacancy is not solely the result of returning demand. A number of dated office blocks have been repurposed into residential or student housing, further tightening supply. At the same time, few new office developments have reached completion in recent years.
That could change in the coming months, with several large schemes set to complete in 2025. These new builds may temporarily push vacancy rates higher, but for now, the UK office market appears to have found its floor after four years of contraction.
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