UK office vacancy rates have fallen for the first time since 2020 as companies rethink remote work
The UK office market may have reached a turning point, with vacancy rates falling for the first time since the pandemic began. The new data reveals a modest but symbolic decline in the number of empty office spaces, suggesting that businesses are beginning to retract their once abandoned tables.
As of the end of March, the national office vacancy rate fell to 8.6% from 8.7% at the beginning of the year, according to Costar, a commercial property data provider. Despite the small drop, it marked the first drop in availability since 2020, when the UK entered its first Covid lockdown with a vacancy of just 4.6%.
By the end of 2024, the vacancy had nearly doubled to 9%, and the company cut its total footprint by 41 million square feet, equivalent to 82 full-packed gherkin buildings. Recent reversals suggest that the trend may be slowing down or even starting to reverse.
In the first quarter of 2025, the company's office space was 1 million square feet more than the office space left. Half of the UK's largest towns have seen vacancy rates drop, including London, Manchester, Sheffield and Cambridge.
Mark Stansfield, senior director of UK analysis at COSTAR, said the data suggests that most companies have now completed the “rights” of their office estates. “There is a clear pattern in a situation where businesses have lowered space during the pandemic. But we are now seeing some of these companies occupy more space again.”
In London, HSBC is reportedly seeking overflow office space near St. Paul’s Cathedral, fearing it may have been trimmed too far. Magic Circle law firm Linklaters plans to occupy 14 floors in its new headquarters and now has occupied all 17 floors. BP and Virgin Media have also expanded to other spaces in their buildings.
But this transformation is not limited to the capital. In Manchester, Auto Trader signed the largest office lease outside London this year, occupying a 137,000 square foot lease on 3 Circle Square, twice as many as the previous venue.
Several major employers, including Amazon, Boots, Dell and many Bank of America, have asked for five days of office returns to employees. UK offices are now busier than at any time since the first lockdown, with average occupancy climbing to 38%, but still below the pre-pandemic average of 60%.
The company prioritizes modern, energy-efficient buildings, and “flying to quality” continues to dominate. Between 2020 and 2024, tenants evacuated a net 57 million square feet of “secondary” office space, while net demand for top-tier “Prime” buildings increased by 16 million square feet.
The decrease in vacancy is not only a result of returning demand. Many outdated office buildings have been repurposed for residential or student housing, tightening supply further. Meanwhile, in recent years, few new office developments have been completed.
Things are likely to change over the coming months, with several large plans set to be completed in 2025. The new buildings may temporarily increase vacancy rates, but for now, the UK office market appears to have found its floor after four years of shrinking.
