Office

January 2026 Forecast

Take-up

Take-up across Central London in 2025 reached 11.4m sq ft, and the Big Six* regional cities recorded 4.2m sq ft. We forecast broadly similar total volumes in 2026 in Central London, but slightly below last year’s level in the Big Six. Stemming from a lack of desirable stock, renewals and regears have been at a higher level than normal. This is translating to lower take-up levels, something we expect to continue in 2026.

Midyear review

• Take-up in H1 2026 was slightly down on the same period last year, however the outlook for the full-year volumes remains unchanged and in line with 2025. This implies a stronger second half of the year for leasing activity.
• There has been a significant increase in leasing activity from AI-related firms in Central London, totalling 0.7m sq ft in H1 2026; already more than two times the level seen for the full-year 2025. This brings their total cumulative take-up since 2015 to 2.2m sq ft. At the end of Q2, we tracked 289,750 sq ft of active requirements by AI companies looking for Central London offices.
• The UK regional cities have seen more government-led demand in 2026, particularly from cybersecurity and defence-related activity, including a 115,000 sq ft leasing deal to the GPA in Manchester in Q1 2026.

January 2026 Forecast

Pipeline constraints persist

The development pipeline remains acutely constrained. With limited unlet, under-construction space across all UK markets tracked by CBRE at end-2025, supply is insufficient to meet occupier demand. Construction starts are expected to stay below long-run trend levels in 2026, held back by planning constraints, elevated build costs, and the high cost of development finance, all of which will deepen the structural shortage of grade A space as the year progresses.

Midyear review

• The office pipeline remains constrained across UK markets, and the scarcity of unlet, under-construction space is outpaced by demand. Of this, a significant proportion is refurbishment rather than new-build – 47% in Central London and 42% in the Big Six.
• The repositioning of 0.8m sq ft of lab development space to office and lab-enabled space has boosted the total pipeline figures in Central London. This reflects a pragmatic response from landlords as occupier demand has broadened and evolved beyond pure laboratory requirements.
• New development starts are being held back by a combination of factors: high financing costs, geopolitical shocks, input cost volatility, planning friction, and a structurally constrained labour supply. According to Turner & Townsend, tender price inflation is expected to increase to 3.5% in 2026, from 3.0% in 2025.

January 2026 Forecast

Above-inflation rental growth

Having recorded strong double-digit prime rental growth in both the City core and West End core in 2025, we expect further growth in both London and the regions this year, albeit at a more moderate pace. The constrained supply of grade A space will sustain upward pressure on prime rents across all UK markets in 2026.

Midyear review

• Rental growth continued in the first half of 2026 across Central London. The City saw prime rents increase by £5.00 psf, reaching £95.00 psf in Q2. This reflects a 12% year-on-year increase. Mayfair and St James’s also saw prime rental growth in the first half of the year, reaching £200.00 psf, reflecting an 18% increase year-on-year.
• Prime rents in most UK regional cities have increased this year, with Birmingham and Manchester reaching £52.00 psf and £48.00 psf, respectively.
• Our expectations around prime rental growth in 2026 are broadly unchanged. We anticipate that prime rents will continue increasing in 2026 across London and the regions, but broadly at a more measured rate than last year.

H2 2026 Outlook

Healthy prime rental growth expected, underpinned by strong supply-demand dynamics

Expectations around the full-year take-up remain broadly unchanged, with Central London demand likely to reach a similar level to 2025. Take-up in the Big Six is still expected to be lower this year compared to last year. There are additional downside risks, largely due to the ongoing geopolitical tensions. However, this has not significantly affected occupier decision-making so far in 2026.

Take-up by the TMT sector has driven total leasing volumes in Central London so far this year, and a significant proportion of this is from AI firms. We expect TMT take-up to significantly outpace the 2025 total, with continued strong demand from AI firms anticipated in H2 2026.

Figure 4: Office take-up by AI as a proportion of tech industry activity, Central London

Prime rents in the City core are forecast to continue their strong upward trajectory through 2026. Following exceptionally strong rental growth in 2025, the West End core is forecast to see a slower rate of growth this year.

Both Birmingham and Manchester are expected to see double-digit prime rental growth for the full-year 2026.

The four markets are expected to sustain year-on-year prime rental growth above inflation in 2026, driven by the lack of new supply.

Figure 5: Prime office rents vs CPI inflation, indexed (Q1 2023 = 100)