Budget fails to dampen commercial property activity
Leasing and investment demand for commercial real estate remained high in the last few months of 2025, as the industry swerved Budget uncertainty that rattled the housing market.
While growth in demand was slightly tempered by speculation surrounding tax changes, year-on-year figures remained robust among individual spaces.
Office space investment demand reported a four per cent year-on-year increase, while industrial demand jumped 12 per cent, according to the Rightmove’s latest property index.
Leisure suffered a seven per cent drop, with analysts predicting “muted” demand in the period leading up to the Budget for this sector.
Leasing demand also remained high within the commercial sector, with industrial demand rocketing 11 per cent.
Demand for office and leisure spaces was more subdued, rising two per cent and one per cent respectively, while retail leasing declined four per cent.
Andy Miles, managing director, commercial at Rightmove, said: “It seems that uncertainty in the run up to the Budget suppressed demand in some areas, but it’s positive that it mostly continued to grow year-on-year.
“Some business leaders understandably delay their decision making when potentially large financial changes are just around the corner.”
Miles noted the continued demand for commercial properties was “a positive sign for the year ahead”, while the ongoing fall in interest rates will also help make commercial property investment “more attractive.
London demand droops
Demand for commercial spaces plunged in the capital, dropping by more than the national average, after the rise in hybrid working and high inflation caused many businesses to leave their office space, ultimately shrinking supply.
Leasing office interest suffered a nine per cent year on year drop, with Canada experiencing a staggering 24 per cent drop.
Demand in Kensington and Chelsea plummeted 44 per cent, as the posh borough continues to struggle against high prices, with property prices also dropping 16.3 per cent to an average £1.19m in November.
Meanwhile, retail leasing declined 16 per cent and industrial demand fell three per cent.
Retail interest remained unchanged.
The Northern rise
In contrast to London’s fall, Northern demand rocketed, as business owners and investors scrambled to get their hands on properties.
Yorkshire and Humber reported the greatest appetite for industrial properties, with a 24 per cent rise, reflecting its status as a manufacturing hub as well as lower property prices compared to Southern regions.
Scotland experienced a 32 per cent rise in leisure property leasing, while the West Midlands experienced the highest demand for retail, however this was the most subdued sector, with just a seven per cent rise in interest.
Darren Bond, Global Managing Director at Christie and Co said: “We are optimistic about the market outlook for our specialist sectors.
“The visibility and pipeline of transactions anticipated to happen in the first half of the year are encouraging when compared with the same period a year ago.
“There is no doubt that cost pressures will continue to put a strain on businesses, and the economic environment will be more challenging in the year ahead.
“As long as demand remains at the current level, with bank funding readily available, then we see no reason why market sentiment shouldn’t be maintained and even surpass the levels seen in 2025.”