Demand for commercial real estate in the UK remained largely positive in both leasing and investment during Q4 2025, despite uncertainty around the November Budget, according to Rightmove’s latest Commercial Insights Tracker.
Growth in demand was slower than in the previous quarter and compared with the same period last year. This was partly due to the timing of Labour’s second Budget, held unusually late on 26 November, and extensive speculation in the months leading up to it. Many business leaders delayed decisions while awaiting potential changes to the tax code.
“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,” said Andy Miles, managing director, commercial, at Rightmove. “Some business leaders understandably delay their decision-making when potentially large financial changes are just around the corner.”
Figures for the last quarter of 2025 were robust despite the uncertainty.
Miles added, “There are positive signs ahead for the rest of 2026. Not only is demand largely higher than last year, but we are expecting to see further interest rate cuts starting later this year, which would help to make commercial property investment more attractive and viable to some investors.
“It’s still a difficult cost climate for many businesses, but stable demand to lease commercial space and interest rate reductions for investors would help to create some momentum for the 2026 market.”
The Budget introduced a significant shake-up to business rates. From April 2026, a new five-category multiplier structure will apply. It includes a clear distinction between retail, hospitality and leisure properties, all other commercial properties, and a new band for high-value premises.
Demand to lease industrial property increased the most year-on-year, rising 11%, followed by offices at 2% and leisure at 1%. Retail leasing demand fell by 4%. In terms of investment, industrial again led with a 12% increase, followed by offices (4%) and retail (3%), while leisure investment demand fell 7%.
At the same time, supply ticked up across all sectors for leasing, and for all but leisure in terms of investment. This aligns with the more muted demand observed at the end of the year.
Leasing demand for office space in key London business locations fell more sharply than the national average, suggesting some business leaders adopted a wait-and-see approach due to the Budget, although tight supply at the prime end of the market may have also contributed. Demand in the City of London dropped nearly 25% compared with the previous year, while Westminster saw an 8% decline.
Darren Bond, global managing director at Christie & 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.”