The UK occupier markets have shown positive signs of recovery over the 12 months to the first quarter. Leasing remained resurgent in some major office markets and national retail take-up recently climbed to a post-pandemic high. In the industrial market, there are signs of the vacancy rate stabilising and while investment volumes have remained subdued, greater clarity around pricing has encouraged activity from previously out-of-favour sectors.
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In the office sector, leasing has bounced back in London, where net absorption has reached a five-year high in the first quarter. These demand gains have been strongest at new schemes in the City, with the West End heartlands also ranked highly. However, office space in West London and fringe locations has become less popular since the pandemic, with many firms opting to move to more central locations.
There has been a divergent performance across the Big Six cities too, split between Edinburgh, leading all markets thanks to strong leasing activity, and Bristol’s vacancy rate being negatively affected by tenants releasing unwanted space and a surge in completions.
Markets with tight supply ranked highly across the industrial markets. Record low vacancy along the M8 corridor means Glasgow continues to outperform. In other regions, there were contrasting fortunes, as Leeds’s low vacancy rate contrasts with greater speculative supply in neighbouring Sheffield. Similarly, in the North West, positive net absorption in Cheshire contrasts with negative absorption in Lancashire and Manchester.
In the retail sector, large department stores and retail warehouses have supported positive net absorption and stable and low vacancies in Kent and Bristol. Meanwhile, leisure and fitness operators have been prominent in retail lettings across several markets in recent times, including Nottingham, where several gyms and health clubs have opened. Compared with relatively robust performance from major cities, several mid-sized cities, such as Cardiff and Derby have fared poorly with negative demand and rising vacancies.
Scottish markets have seen the strongest performance in the hotel sector over the past 12 months, with Glasgow, Edinburgh and Scotland Provincial boosted by international travel demand and busy events calendars. Conversely, a softer start to 2025 and a more downbeat macroeconomic outlook have influenced a mixed picture for London, with RevPAR growth stable. Consumers are likely to remain value-driven but improvements to international travel should help boost visitation to the capital.
In the investment market, a combination of large shopping centre sales and industrial deals contributed to several high-ranking markets. The sale of Meadowhall and large portfolio big box deals in Sheffield have lifted it to the top of the rankings. Industrial investment in recent months has strengthened the position of well-connected North West and Midlands markets, such as Liverpool, Coventry and Manchester, where large deals have been agreed in prime locations.