Commercial Real Estate in UK Market Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029)

The Report Covers UK Commercial Property Market Forecast and Size. The Market is Segmented by Type (Office, Retail, Industrial, Logistics, Hospitality, and Multi-Family) and by Key City and Region (England, Wales, Northern Ireland, Scotland, London (City), and Rest of the United Kingdom).

UK Commercial Real Estate Market Size

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Commercial Real Estate Market in United Kingdom Summary
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Study Period 2019-2029
Base Year For Estimation 2023
Market Size (2024) USD 149.67 Billion
Market Size (2029) USD 184.80 Billion
CAGR (2024 - 2029) 4.31 %
Market Concentration Low

Major Players

UK Commercial Real Estate Market Major Players

*Disclaimer: Major Players sorted in no particular order

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UK Commercial Real Estate Market Analysis

The UK Commercial Real Estate Market size is estimated at USD 149.67 billion in 2024, and is expected to reach USD 184.80 billion by 2029, growing at a CAGR of 4.31% during the forecast period (2024-2029).

  • Real estate was badly hit by the COVID-19 pandemic, experiencing a sharp decline in values across all markets and sectors. Confidence in the UK property market had already been shaken by the uncertainty concerning Brexit. The UK commercial real estate sector has faced many challenges in recent years, from protracted Brexit negotiations to the coronavirus (COVID-19) crisis. Despite this, the United Kingdom remains one of Europe's leading markets for commercial real estate. Leaving the European Union has not helped the United Kingdom address severe labor and material shortages and crippling supply chain issues.
  • The UK commercial real estate is dynamic and vibrant, offering a wide range of opportunities for investors and businesses alike. Despite global economic uncertainties, the UK's commercial real estate market is expected to grow steadily in the coming years, driven by factors such as a robust logistics sector, rising e-commerce demand, and increasing urbanization. For instance, in 2022, the urban population of the United Kingdom was approximately 56.52 million, while the rural population was around 10.45 million. Since 1960, the urban population of the United Kingdom has grown by around 15.4 million, while the rural population has shrunk by around 846,500.
  • British Land, a major player in the London office market, owns iconic buildings like Broadgate and Paddington Central. Sergo, a leading developer and operator of logistics warehouses across the UK and Europe, and Land Securities Group, a diversified REIT with a portfolio of offices, retail, and leisure properties across the Kingdom, are some examples in the market.
  • While challenges like rising interest rates and geopolitical uncertainties exist, the sector's inherent resilience and adaptability give cause for optimism. Investors who embrace innovation, prioritize sustainability, and target high-growth segments stand to reap significant rewards in the years to come.

UK Commercial Real Estate Market Trends

Increasing rents of office spaces

  • With approximately 143 million square feet of available office stock, London City had the most office real estate supply among the major office markets in the United Kingdom (UK) as of the second quarter of 2022. This accounted for almost 40 percent of the total available space in the market during that quarter. Outside of London, Manchester had the most available office stock.
  • Despite the high office rental costs, vacancy rates in many of London's primary office markets were below six percent in 2022. This is good news for the office sector, as the share of vacant office space across all Central London districts spiked dramatically during the COVID-19 pandemic. Compared to other European cities, London was in the middle of the ranking, alongside Frankfurt and Lisbon.
  • According to industry associates, transaction volumes for the office sector in the fourth quarter of 2022 were EUR 1.1 billion (USD 1.19 billion), down 74% from volumes in the third quarter of 2022, marking the lowest volumes reported since 2002. On a year-on-year basis, transaction volumes were down 86% from those in the fourth quarter of 2021. Only 77 office properties changed hands in the fourth quarter of 2022.
  • The office sector experienced significant structural pressure as working habits underwent alterations following the COVID-19 pandemic. Secondary accommodation was at risk of obsolescence and asset stranding, while the capital requirements to ensure assets met minimum Environmental, Social, and Governance (ESG) requirements proved prohibitive to achieving positive returns within the sector. Limited transactional evidence toward the end of 2022 indicated that further pricing discovery was expected in the first half of 2023, according to experts.
UK Commercial Real Estate Market: Monthly development of leading location rental costs for London West End offices, in GBP per square foot, from JAN 2021 to June 2022 (1 GBP = 1.23 USD)

Office segment showing a significant growth in the market

  • The office real estate sector in the United Kingdom has encountered several challenges in recent years, beginning with the United Kingdom's decision to leave the European Union in 2016, followed by years of lengthy negotiations, and culminating in the COVID-19 crisis that paralyzed the world economy in 2020. Despite these challenges, the UK still boasts one of the largest office real estate markets in Europe.
  • Offices have consistently been the top choice for investors when it comes to commercial real estate investments in the United Kingdom, accounting for more than half of total investment volumes.
  • According to industry sources, office investment across the United Kingdom totaled EUR 1.27 billion (USD 1.38 billion) during Q4 2022, marking a 71% decline from Q3 2022 and an 82% drop compared to Q3 2021, attributed to escalating borrowing costs and wider economic turbulence. Throughout 2022, UK office investment amounted to EUR 18.13 billion (USD 19.67 billion), the second lowest annual volume since 2012, surpassing only the pandemic-marred 2020.
  • The slowdown in activity and pricing shifts has led to yields expanding across all markets, with forecasts indicating further softening in 2023 and liquidity expected to return to the market during the first half of 2024.
  • Five years of Brexit negotiations have significantly influenced the landscape of office space, and the coronavirus pandemic has added an extra layer of insecurity about the future of offices.
  • Office take-up is experiencing a resurgence in 2023. High equity targeting the central London prime office market is driving recovery from the pandemic as uncertainties resolve. Flexibility, ESG considerations, and meeting employee lifestyle needs will guide development standards as organizations aim to future-proof their offices. Value-add opportunities are emerging from these trends in multiple UK cities.
UK Commercial Real Estate Market: Prime office yields in the United Kingdom, by city, in percentage, in 2021 and 2022

UK Commercial Real Estate Industry Overview

The commercial real estate market in the United Kingdom needs to be more cohesive due to a low level of market share concentration. The industry is highly competitive. The UK property market is extremely attractive to investors at the domestic and international levels. Property tech is a growing sector in the country, as it is easier to invest, buy, and sell than the usual process. Some players in the market are Land Securities Group PLC, Segro PLC, British Land, Derwent London, and Hammerson.

UK Commercial Real Estate Market Leaders

  1. Land Securities Group PLC

  2. Segro PLC

  3. British Land

  4. Derwent London

  5. Hammerson

*Disclaimer: Major Players sorted in no particular order

Commercial Real Estate Market Concentration
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UK Commercial Real Estate Market News

  • October 2023: British Land received a resolution to grant planning permission for an approximately 140,000 sq ft multi-level last-mile logistics scheme on Mandela Way, Southwark. This project represents the latest addition to British Land’s 2.9 million sq ft pipeline. Situated near the junction of New Kent Road, Old Kent Road, and Tower Bridge Road, the site will serve as a last-mile logistics hub for Southwark and central London.
  • July 2023: British Land and Landsec formulated a comprehensive set of recommendations aimed at regenerating the UK’s towns and cities. Their goal is to stimulate more growth, create additional homes, and generate more job opportunities by enhancing how the planning system supports brownfield regeneration. As major players behind some of Britain’s most significant regeneration projects, including Landsec’s 24-acre Mayfield neighborhood in central Manchester and British Land and AustralianSuper’s 53-acre Canada Water development in London, these property companies bring extensive experience in large-scale, complex urban developments. The insights gained from such projects have been applied and refined in their latest paper.

UK Commercial Real Estate Market Report - Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET INSIGHTS

    1. 4.1 Current Economic Scenario and Consumer Sentiment

    2. 4.2 Commercial Real Estate Buying Trends - Socioeconomic and Demographic Insights

    3. 4.3 Government Initiatives and Regulatory Aspects for Commercial Real Estate Sector

    4. 4.4 Insights into Existing and Upcoming Projects

    5. 4.5 Insight into Interest Rate Regime for General Economy and Real Estate Lending

    6. 4.6 Insights into Rental Yields in Commercial Real Estate Segment

    7. 4.7 Insights into Capital Market Penetration and REIT Presence in Commercial Real Estate

    8. 4.8 Insights into Public-Private Partnerships in Commercial Real Estate

    9. 4.9 Insights into Real Estate Tech and Startups Active in Real Estate Segment (Brokerage, Social Media, Facility Management, and Property Management)

    10. 4.10 Impact of COVID-19 on the Market

  5. 5. MARKET DYNAMICS

    1. 5.1 Drivers

      1. 5.1.1 Growth in the Country's Logistics Sector and warehouse Space

      2. 5.1.2 Increasing Demand for Co-working Office Spaces

      3. 5.1.3 Increasing Infrastructure Investments

      4. 5.1.4

    2. 5.2 Restraints

      1. 5.2.1 Rising Costs

      2. 5.2.2 Sustainability Demands

    3. 5.3 Opportunities

      1. 5.3.1 Life Sciences and Tech Hubs

      2. 5.3.2 PropTech and Innovations in the Industry

    4. 5.4 Industry Attractiveness- Porter's Five Forces Analysis

      1. 5.4.1 Threat of New Entrants

      2. 5.4.2 Bargaining Power of Buyers/Consumers

      3. 5.4.3 Bargaining Power of Suppliers

      4. 5.4.4 Threat of Substitute Products and Services

      5. 5.4.5 Intensity of Competitive Rivalry

  6. 6. MARKET SEGMENTATION

    1. 6.1 By Type

      1. 6.1.1 Offices

      2. 6.1.2 Retail

      3. 6.1.3 Industrial and Logistics

      4. 6.1.4 Hospitality

      5. 6.1.5 Other Types (Schools, Recreational area)

    2. 6.2 By Key City and Region

      1. 6.2.1 England

      2. 6.2.2 Wales

      3. 6.2.3 Northern Ireland

      4. 6.2.4 Scotland

      5. 6.2.5 London (City)

      6. 6.2.6 Rest of the United Kingdom

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Market Concentration

    2. 7.2 Company Profiles

      1. 7.2.1 Land Securities Group PLC

      2. 7.2.2 Segro PLC

      3. 7.2.3 British Land

      4. 7.2.4 Derwent London

      5. 7.2.5 Hammerson

      6. 7.2.6 Capital & Counties Properties PLC

      7. 7.2.7 Shaftesbury PLC

      8. 7.2.8 Tritax Big Box Reit PLC

      9. 7.2.9 Unite Group PLC

      10. 7.2.10 Wayhome

      11. 7.2.11 AskPorter

      12. 7.2.12 Landbay

      13. 7.2.13 Thirdfort

      14. 7.2.14 RentProfile*

    3. *List Not Exhaustive
  8. 8. FUTURE OF THE MARKET

  9. 9. APPENDIX

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UK Commercial Real Estate Industry Segmentation

Commercial real estate is a property used exclusively for business-related purposes or to provide a workspace rather than as a living space. Most often, commercial real estate is leased to tenants for income-generating activities. In general, it includes buildings used for commercial purposes, including office buildings, warehouses, and retail buildings (e.g., convenience stores, 'big box stores, and shopping malls).

The UK commercial real estate market is segmented by type (office, retail, industrial and logistics, hospitality, and other types (schools and recreational areas) and by key city and region (England, Wales, Northern Ireland, Scotland, London (City), and the rest of the United Kingdom).

The report offers market size and forecast values for the UK's commercial real estate market in value (USD) for all the above segments.

By Type
Offices
Retail
Industrial and Logistics
Hospitality
Other Types (Schools, Recreational area)
By Key City and Region
England
Wales
Northern Ireland
Scotland
London (City)
Rest of the United Kingdom
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UK Commercial Real Estate Market Research FAQs

The UK Commercial Real Estate Market size is expected to reach USD 149.67 billion in 2024 and grow at a CAGR of 4.31% to reach USD 184.80 billion by 2029.

In 2024, the UK Commercial Real Estate Market size is expected to reach USD 149.67 billion.

Land Securities Group PLC, Segro PLC, British Land, Derwent London and Hammerson are the major companies operating in the UK Commercial Real Estate Market.

In 2023, the UK Commercial Real Estate Market size was estimated at USD 143.22 billion. The report covers the UK Commercial Real Estate Market historical market size for years: 2019, 2020, 2021, 2022 and 2023. The report also forecasts the UK Commercial Real Estate Market size for years: 2024, 2025, 2026, 2027, 2028 and 2029.

The key drivers of UK Commercial Real Estate Market are a) Growing demand for warehousing space and Last-mile logistics b) Rise in demand for flexible workspaces like co-working spaces and serviced offices

Commercial Real Estate in UK Industry Report

The United States property management market is witnessing significant growth, driven by an increasing demand for both commercial and residential rental properties. This surge is attributed to the availability of accessible, affordable, and high-quality properties in major city locations across the USA. Advanced technologies such as virtual reality, artificial intelligence, the internet of things, and machine learning are being integrated into property management, further boosting the market size. However, the market faces challenges such as increasing security and data breaches, as the software used by the largest property management companies in the US collects crucial and personal information of both clients and owners, making the real estate industry vulnerable to security threats. The market is segmented into software and services, with software dominating due to its ability to manage multiple property operational tasks. In terms of deployment, cloud-based software is leading the segment due to its advanced security and cost-effective solutions. The residential sector holds the largest market share in the property management market in the USA, with property managers being the dominant end-users. This analysis of the US Property Management market, including market share, size, and revenue growth rate, is provided by Mordor Intelligence™ Industry Reports. The analysis includes a market forecast outlook and historical overview. A sample of this industry analysis is available as a free report PDF download.

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Commercial Real Estate in UK Market Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029)