London outpaces national trends as prime assets show resilience
The UK commercial property market showed little movement in the second quarter of 2025, according to the latest data from the Royal Institution of Chartered Surveyors (RICS).
While the overall market remained subdued, London’s office sector demonstrated more positive signs compared to the rest of the country.
National occupier demand for commercial space edged slightly lower in the quarter, with net balances of +2% for offices and +4% for industrial properties. RICS noted that results within a range of +5% to -5% indicate stable conditions. The retail sector continued to underperform, posting a net balance of -13% for the second consecutive quarter.
Despite the lack of significant movement, most survey participants expect rental prices to rise in the office and industrial sectors over the coming year. However, anticipated growth is largely focused on prime properties, highlighting an increasing divide between prime and secondary assets.
Central London’s office market stood out, with respondents reporting stronger demand than the national average. This trend is expected to support higher rental growth in the capital both in the short term and over the next 12 months. Retail in central London also showed some improvement, though to a lesser extent.
Vacancy rates increased across all sectors, leading landlords to enhance incentive packages to attract tenants. Investment enquiries were unchanged, with a net balance of 0%. Respondents were evenly split on the market’s direction, with 35% believing conditions are improving and an equal share expecting a downturn.
“The latest UK Commercial Property Monitor results remain consistent with a largely stagnant market at the national level,” said Tarrant Parsons (pictured right), head of market research and analysis at RICS.
“Both occupier demand and investment enquiries are still broadly flat, while landlords continue to offer significant incentives to attract tenants amidst rising vacant space.
“That said, prime assets and alternative sectors are poised for modest capital value and rental growth over the year ahead, with a slightly more favourable credit environment lending some support to the outlook.”
For mortgage brokers, the report’s findings signal a market in transition, with opportunities and challenges emerging depending on sector and location. The flat conditions in most commercial segments suggest that brokers may need to focus on clients seeking prime assets, where rental and capital value growth is more likely. The continued division between prime and secondary markets could drive demand for tailored mortgage solutions, especially as landlords and investors look for ways to maximise returns in a subdued environment.
The increase in vacant space and the use of incentives by landlords may also influence lending criteria and risk assessments. Mortgage brokers will need to stay alert to shifting trends in occupier demand and the evolving preferences of lenders, particularly as banks respond to calls for more affordable and flexible mortgage products. As affordability remains a central issue for many clients, brokers play a key role in guiding borrowers through a complex landscape and helping them access suitable finance options.
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