Strong demand for premium office space but speculative development held back by caution over project viability

The speculative office development sector across London and the wider South of England is experiencing mixed dynamics, shaped by tightening supply, strong tenant demand for the limited good stock available and evolving occupier requirements, but countered by cautious investor sentiment.

Occupier take-up in prime areas is strong with vacancy rates below 2% in parts of the market, highlighting shortages of available good quality space in the market.

The outlook for speculative office schemes has been shaped by a thinning near-term development pipeline. Carter Jonas notes that declining volumes of uncommitted Grade A space across London submarkets are driving occupiers toward early engagement and pre-let arrangements, with speculative supply unlikely to rebalance before the latter part of the decade.

Planning activity has picked up since early 2025, with major commercial towers signalling renewed confidence and momentum returning to previously delayed schemes. However, many of these schemes are yet to be greenlighted for construction procurement and delivery to the market will be the latter end of this decade for many. Tender prices are forecast to rise by around 3% over the next year, making early contractor engagement critical in the speculative market.

Across southern regional markets, speculative development remains subdued. Prime rents continue to climb due to shortages of top-grade space. Construction viability remains the most significant barrier to speculative development.

Planning activity has picked up since early 2025, with major commercial towers signalling renewed confidence and momentum returning to previously delayed schemes. However, many of these schemes are yet to be greenlighted for construction procurement and delivery to the market will be the latter end of this decade for many. Tender prices are forecast to rise by around 3% over the next year, making early contractor engagement critical in the speculative market.

Across southern regional markets, speculative development remains subdued. Prime rents continue to climb due to shortages of top-grade space. Construction viability remains the most significant barrier to speculative development.