The UK commercial property market is entering a phase where prime rents are rising sharply while secondary space struggles to hold its value. In central London, average prime office rents in the City hit £130.80 per sq ft in the first quarter of 2026, a 40% increase year-on-year, according to Residential & Commercial Property Research. That figure alone tells you something important: the gap between the best buildings and the rest is widening fast. Here’s what you actually need to know.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
What’s driving this isn’t a booming economy. UK GDP growth stalled at the end of 2025, with GDP per capita falling for two consecutive quarters, and unemployment rising to 5.2%, as Colliers reports. Instead, rental growth is being sustained by a severe shortage of new supply and a narrow band of tenant demand focused on the best space. If you’re a business owner, investor, or landlord trying to make sense of where rents are heading, the old rules of thumb won’t help. The market is splitting into two distinct realities.
Understanding the Prime-Secondary Rent Split
The most important concept to grasp right now is the widening gap between prime and secondary rents. In the City of London, secondary office rents averaged just £37 per sq ft in late 2025, down 19% year-on-year, while prime rents surged. That’s not a small difference — it’s a chasm. What’s happening is that occupiers are consolidating into fewer, higher-quality spaces, leaving older or poorly located buildings to compete on price alone.
This isn’t just an office story. Across industrial, retail, and hospitality, the same pattern is emerging. Buildings that meet modern environmental standards and offer good transport links are outperforming. Those that don’t are seeing rents stagnate or fall. What I tend to notice is that many businesses still underestimate how quickly this preference has hardened into a market requirement.
Why the Supply Shortage is Driving Rents Higher
Development activity across UK commercial property remains low. In central London, office development starts in 2025 were almost exactly in line with the long-term average, according to Savills. That sounds normal until you consider that tenant demand for prime space hasn’t dropped — it’s shifted. Occupiers are renewing leases or regearing terms at above-average rates, particularly for well-located stock.
The result is that vacancy rates for new Grade A office space are near historic lows of 1–1.5%, as Colliers notes. When supply is that tight, landlords of prime buildings have pricing power. But that power doesn’t extend to the wider market. Secondary buildings face a different reality: higher vacancy, longer letting periods, and downward pressure on rents.
For industrial and logistics, the picture is slightly different. Vacancy has risen to its highest level in over a decade, yet rental growth is still forecast at around 3–4% per annum. That’s because the new supply coming through is mostly prime, modern space that commands higher rents, while older stock is being repositioned or redeveloped.
Where People Get the Commercial Rent Picture Wrong
Assuming all offices are struggling
It’s easy to look at headlines about hybrid working and assume office demand is collapsing. But the data tells a different story. Central London leasing activity in Q1 2026 reached 2.2 million sq ft across 152 transactions, up 6% year-on-year, and active demand hit 14.6 million sq ft. The issue isn’t demand — it’s that demand is concentrated on a narrow slice of the market. If you’re marketing a building without strong ESG credentials or in a secondary location, you’re competing in a much tougher pool.
Overlooking the cost of debt
Many investors assume that falling interest rates will automatically boost property values. But the spread between property yields and the all-in cost of debt remains unattractive in many sectors, limiting yield compression. As Savills points out, this means income-led returns will define performance, not capital growth. Expecting quick capital gains from yield compression is a mistake in this environment.
Ignoring the polarisation in retail
Retail isn’t dying — it’s splitting. Retail parks and prime high streets are performing well, with rental growth forecast at 2.4% in 2026. But locations outside the top tier face continued challenges, and corporate failures are now “priced in” by landlords who are actively repositioning assets. The mistake is treating all retail as one category.
Underestimating ESG as a leasing prerequisite
Major occupiers now treat ESG credentials as a non-negotiable requirement, not a nice-to-have. Buildings rated BREEAM Excellent or Outstanding made up 53% of central London take-up in Q1 2026. If your building doesn’t meet these standards, you’re effectively excluded from a large portion of tenant demand. Retrofitting or upgrading is becoming less optional by the year.
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| Sector | Forecast Rental Growth (2026) | Key Driver |
|---|---|---|
| UK Industrial | 3.2% | Slowing speculative development; stabilising build costs |
| Central London Offices | 3.0% | Severe supply shortage; flight to quality |
| Regional Offices | 2.0% | Lack of speculative development; prime demand resilient |
| Retail (overall) | 2.4% | Retail parks and prime high streets leading |
How to Navigate the New Commercial Rent Landscape
Assess your building’s position honestly
The first step is understanding where your property sits in the market. Is it prime or secondary? Does it have strong ESG credentials? Is it in a location that tenants are actively seeking? If you’re a landlord, this assessment determines your strategy. For prime assets, the focus should be on maintaining standards and capturing rental growth. For secondary assets, the question is whether to invest in upgrading, reposition, or accept a lower rent trajectory. If you’re a tenant, this same assessment helps you negotiate — knowing the vacancy rate for your building type gives you leverage.
Understand the cost of inaction on ESG
With 53% of central London take-up going to BREEAM Excellent or Outstanding buildings, the market has already made its choice. If your building doesn’t meet these standards, you’re competing for a shrinking pool of tenants. Retrofitting is expensive, but the alternative — accepting lower rents or longer void periods — has its own cost. For businesses looking to lease, prioritising buildings with strong ESG credentials isn’t just about sustainability; it’s about future-proofing against rising operational costs and regulatory pressure.
Watch the regional office markets
It’s not just London. Regional offices are expected to be resilient, with prime rental growth driven by a severe shortage of speculative development. The ‘Big Six’ regional markets are anticipated to see rent increases, according to Colliers. If you’re considering a lease outside London, the same flight-to-quality dynamic applies, but the supply constraints are even tighter in some regional cities. That means prime rents could rise faster than many expect.
Factor in the changing fiscal landscape
The UK government has committed to having only one fiscal event per year, aligning with international peers. That removes a short-term reason for delaying transactions, as Savills notes. For businesses planning lease negotiations or investment decisions, this means fewer sudden policy surprises. But it also means that when changes do come, they may be larger and more consequential. Planning ahead with professional advice becomes more important, not less. If you’re dealing with complex lease terms or property disputes, speaking with a tenant or landlord lawyer can clarify your position before you commit.
Prepare for a foundation year, not a boom
Colliers describes 2026 as a “Stabilisation+” year — improving liquidity and more workable funding conditions, but not a return to rapid capital growth. Income-led returns will define performance. That means rental income, not capital appreciation, should be your primary focus. For tenants, this stability can be an opportunity to secure favourable terms on prime space before competition intensifies further. For landlords, it means managing assets actively — refurbishment and repositioning are key drivers of returns in this phase.
Frequently Asked Questions About UK Commercial Rent Trends
Will commercial rents keep rising in 2027? ▾
Is it a good time to sell a secondary commercial property? ▾
How does hybrid working affect industrial rents? ▾
What does ESG compliance mean for my rent? ▾
Are retail parks a safe bet for rental income? ▾
Should I lease now or wait for rents to drop? ▾
The Market is Choosing Sides — Know Which One You’re On
The UK commercial rent market isn’t moving in one direction. It’s splitting. Prime assets in strong locations with modern credentials are seeing record rents and tight vacancy. Secondary assets face a slower, more difficult path. The key isn’t to predict which way the whole market will go — it’s to understand where your property or business sits within that divide. That assessment, made honestly, will tell you whether to invest, negotiate, or reposition.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read The Great Office Debate: Is Remote Work Really Killing UK Commercial Leasing?
Sources and Further Reading
Navigating Tenant Service Charge Caps in the UK — Understand how service charges affect your total occupancy costs and what caps mean for lease negotiations.
Understanding Catchment Areas When Renting Commercial Space in the UK — Location analysis is more important than ever in a polarised market. This guide breaks down how to assess a catchment area properly.
Savills (2026). UK Cross Sector Outlook 2026: Commercial. 🔗
Colliers (2026). Commercial Real Estate Predictions 2026. 🔗
CBRE (2026). UK Real Estate Market Outlook 2026. 🔗
Colliers (2026). UK Real Estate Investment Forecasts Q1 2026. 🔗
Residential & Commercial Property Research (2026). UK Commercial Property Market Update: Rents, Yields & Valuations (Q2 2026). 🔗
