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Sector trends

Hybrid work, office demand and market shifts in UK real estate

The future of office space is evolving but broader market dynamics like interest rates and asset obsolescence continue to shape the sector.

As the debate around remote work continues, most large employers in the UK have adopted a hybrid model, requiring employees to spend 2-4 days in the office. 

This shift in workplace dynamics is expected to have a minimal direct impact on office demand, given the ongoing need for spaces that can accommodate peak occupancy.

The weak office investment market is being driven more by factors like rising interest rates and the increasing costs associated with obsolescence. These pressures are leading investors to focus on more lucrative asset classes, where liquidity is starting to improve — particularly in the Retail and Industrial sectors, which are showing signs of value recovery.

Despite these challenges, rental values across most commercial sub-sectors have remained surprisingly resilient, with some experiencing moderate growth. 

For businesses in the commercial real estate sector, navigating these complex trends requires a keen understanding of both emerging demand patterns and the broader economic forces at play.

Read the UK Real Estate Digest 2025

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