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Office space leads commercial real estate demand surge, research finds

Rangewell's recent research found that office space is currently the most sought-after corner of commercial real estate.

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Office space leads commercial real estate demand surge, research finds
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Research by Rangewell has revealed that office space is currently the most sought-after corner of commercial real estate – seeing a bigger quarterly demand increase than retail, hospitality, industrial, and commercial development land.

Rangewell’s ‘Commercial Property Demand Index’ analysed demand for commercial property across each market segment and how this demand has changed on a quarterly basis.

The research showed that across England, office buildings were the most in-demand commercial property type across the commercial sector in Q4 2024, with 29% of all available listings having already found a buyer.

Retail units were a close second with investor demand at 28.5%, with development plots the third most popular at 27.9%.

Analysing the data on a regional level shows that despite being the most in-demand sector in England, offices only topped demand in two areas of the country, namely the West Midlands (40.8%) and South West (34.5%).

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Retail only topped the regional list in the North West, where 29.5% of listings have already secured a buyer, while development plots have seen the highest level of demand four different regions: the South East (40%), London (38.3%), East of England (32.3%), and Yorkshire & Humber (27.3%).

When it came to quarterly demand growth in England, office space once again topped the list, with demand rising by 2.1% between Q3 and Q4.

Retail (+1.7%), and leisure/hospitality (+0.4%) also saw quarterly demand increases, while industrial units (-2.3%) and development plots (-3.5%) both saw buyer demand drop since Q3.

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Alasdair McPherson, head of partnerships at Rangewell, said: “Since the early days of the pandemic, office buildings have been struggling to maintain occupancy and therefore experienced falling demand with many industry commentators projecting that it was the start of a long-term demise for the sector.

“But we’re seeing more and more businesses, from private sector giants such as Amazon through to government departments recalling their staff into the office, and perhaps, albeit from a low level of demand over the last couple of years, we are now witnessing a rebirth of the workplace which will surely increase demand for office space and, therefore, push demand up amongst commercial investors and buyers.

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“The retail space is enjoying a similar bounce back specifically in smaller units and specialist growth sectors.

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“Demand for industrial units is strong regionally as would be expected and development land for commercial premises remains particularly strong in London and the South East.

“Rising interest rates and the continually high price of construction materials are making development projects harder to finance and harder to deliver within tight budget restraints – but lender appetite remains – especially for pre-let projects.

“Finally, a knock on effect from what will be a surge in residential construction with the Labour Government push to build more residential homes will be the increase in commercial developments that almost always accompany mid to large residential schemes.”

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