South-East office take-up hits three-year high as lack of prime space creates unprecedented opportunity.

Download the Thames Valley and South East Office Market 2025 Report in full here

Resilient demand and a lack of current and future prime space are creating an unprecedented investment opportunity in the South-East office market, according to new research from Lambert Smith Hampton (LSH).

Despite geopolitical and economic uncertainty, leasing activity so far in 2025 has been strong. Q1 take-up hit a three-year high of 1.1m, and expectations of circa 900,000 sq ft of additional take-up in Q2 will make for the strongest half-year total since H2 2021 (9% above the long-term average).

The revival partly reflects a resurgence of larger transactions. Q1 saw 14 deals above 20,000 sq ft, compared with six in Q4 2024. Near-term demand also appears resilient. As of June 2025, active requirements across the region stand at around 2.3 million sq ft, driven by a big uptick in larger corporate requirements over 30,000 sq ft

Buoyant demand reflects strong appetite for ESG and more concerted efforts to attract staff back to the office. These trends have helped occupancy rates settle towards a new norm, which is encouraging occupiers to finally get on with the business of relocating into the space they need and in turn driving demand for prime spaces, according to LSH.

Occupiers continue to show willingness to pay for the best spaces. Prime rents have increased by an average of 25% on previous high watermarks in markets where prime space has been delivered over the past two years. Standout performers include One Station Hill in Reading (up 45% to £56 per sq ft) and the PLANT in Basingstoke (up 36% to £38 per sq ft).

While overall supply edged up to a 13-year high, it is approaching peak reflecting pressure from alternative uses and a dwindling development pipeline. 2.4m sq ft of speculative development was under construction across the region at the end of Q1, although 81% of this is in Oxford and Cambridge. Construction activity is extremely limited elsewhere, at only 350,000 sq ft net of pre-lets.

Prime space accounts for only 10% of the region’s total supply, despite accounting for 23% of take-up over the year to Q1 2025. It is also unevenly distributed, with 63% of the regions 30,000+ sq ft options concentrated in just five markets: Hammersmith & Chiswick, Reading, Slough, Oxford and Cambridge.

Investment-wise, activity is strong but improving investor sentiment is yet to be reflected in volumes. Q1 saw 35 transactions – the most since Q4 2021 and significantly up on the five-year average of 28. However, volume stood at £259m in Q1, down sharply from £578m in Q4 2024 and the third lowest out-turn across the past five years. Volumes are set to remain unremarkable in Q2, with current stock amounting to c. £500m and roughly half of what it was a year ago. This reflects limited buying opportunity as opposed to a lack of demand.

Andrew Hodgkinson, Senior Director at LSH, said: “Something of a perfect storm is emerging. Occupier demand is improving, but this comes with a critical lack of prime options and a thin pipeline to boot. What this creates is fresh opportunity for those brave enough to capitalise on this shortfall – especially in aspirational locations with infrastructure and affordability advantages but a lack of prime supply, notable examples including Maidenhead, Milton Keynes and Woking.”

Charlie Lake, Executive Director, National Head of Office Investment at LSH, added: “A painful period of price adjustment is finally coming to an end – not only for prime assets, which have been steadier for longer, but also for the secondary market. At the same time strong rental growth, together with a limited choice of best-in-class product, is creating an unprecedented window of opportunity in the value-add space.”

Download the Thames Valley and South East Office Market 2025 Report in full here