The United Kingdom is home to the largest commercial real estate market in Europe. The country’s diverse and robust economy and London’s status as a leading global financial center make the UK an attractive destination for both domestic and international investors. In 2023, slower economic growth and higher borrowing costs caused the
to plummet. Despite a less favorable investment and development climate globally, London ranked as the European
in 2024.
How much does the average commercial rent cost in the UK?
The location and quality of a property are paramount in determining its rental rate. Retail spaces with maximum accessibility, footfall, and visibility, such as London’s main shopping streets, are usually the most expensive to rent. In 2023, London’s famous Bond Street had an
average high street rent of 2,000 British pounds per square foot. Renting a best-in-class office space in the same district, the West End of London, known for its buzzing life, numerous tourist attractions, shopping streets, and multinational companies, cost about 138 British pounds per square foot in the same year. That was roughly three times higher than the
average office rent in other big cities in the country, such as Bristol, Birmingham, and Manchester. The
average warehouse rent in the East Midlands, one of the most important logistics hubs in the country, cost 10 British pounds per square foot in 2023. That includes units over 50,000 square feet, such as third-party logistics, retail warehouses, and manufacturing facilities.
Which property types have the best growth prospects?
Over the past decade, industrial real estate has enjoyed growing popularity among investors. The UK’s decision to leave the European Union in 2016 and the COVID-19 pandemic underlined the importance of safeguarding supply chains. That fueled demand among occupiers, but supply struggled to catch up. As a result, warehouses are forecast to generate the highest
rental growth and
capital value increase in the UK commercial real estate sector. Offices are expected to yield a total
annualized return on investment of 5.8 percent until 2028 – the lowest in the commercial sector. Following the COVID-19 pandemic, vacancy rates for offices have increased. Nevertheless, demand for best-in-class, newly-built offices will continue, resulting in growing property values and rents.
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