CBRE reports strong demand for premium office space and record data centre growth in the UK

The UK’s commercial property market is showing sharply contrasting performances across key sectors at the midpoint of 2025, according to CBRE’s latest UK Real Estate Market Outlook Mid-Year Review. While the office market is benefiting from strong demand for premium office space and renewed overseas investment, the life sciences sector is seeing steady growth in funding but slower movement in transactions.

At the same time, the data centre market is entering a period of exceptional expansion, with record levels of take up forecast and new developments extending beyond traditional hubs. The findings highlight how underlying supply constraints, shifting occupier needs and targeted government support are reshaping investment priorities across the country.

Some of the report’s key findings include:

Offices
Demand for Grade A premium office space remains strong, with limited supply driving rental growth across all UK markets tracked by CBRE. London’s City submarket is expected to see the highest increase in prime rents in 2025, followed by the West End. Constrained pipelines, coupled with strong occupier demand, are supporting values, particularly in locations with good transport links and amenities.

Investment activity is being buoyed by larger lot size deals and a resurgence of overseas buyers, who account for 59 percent of transactions so far this year. The flexible workspace sector is also diversifying, with both flex operators and landlords in regional cities expanding their offerings. While volumes are forecast to improve on the past two years, they remain below pre pandemic norms.

Life sciences

The UK’s life sciences sector is poised for renewed momentum, with venture capital funding in the first half of 2025 reaching £2 billion, exceeding equivalent periods in the previous three years. Leasing volumes have risen 65 percent year on year, although there is still a disconnect between funding rounds and immediate space requirements.

Government policy is set to play a pivotal role, with the Life Sciences Sector Plan aiming to position the UK as Europe’s leading hub by 2030. However, challenges such as the high drug rebate scheme (VPAG) and regulatory delays persist. Transaction activity has been subdued due to a mismatch in buyer and seller pricing expectations, though modest improvement is expected in the second half.

Data centres

The data centre market is on course for a record breaking year, with London take up forecast to hit 183MW in 2025, a 58 percent rise on 2024 and well above earlier predictions. Almost all new space expected this year will be pre let, pushing vacancy rates in the capital below 8 percent.

With power constraints in traditional hubs like Slough and Docklands, operators are increasingly seeking sites outside the M25. Relaxed planning rules, including in some green belt areas, are enabling new developments to proceed. Government backing, which designates data centres as “Critical National Infrastructure”, is expected to underpin further growth, with AI workloads and hyperscaler demand driving much of the expansion.

Image:  The Union Park data centre in Hayes