From offices to opportunity – The outlook for commercial real estate

The following summary captures the key points explored during the presentation.

Offices are recovering, but selectively

Office occupancy levels have improved, particularly in regional city centres. Corporate attitudes toward in-office working have shifted once again, with many employers reinforcing their commitment to physical space. However, this return is highly segmented: well-located, ESG-compliant buildings are attracting tenants, while older and poorly specified offices continue to lag.

The market is no longer rejecting the office; it is rejecting the outdated ones. Refurbishment has become the strategy of choice in many cities, especially as new development remains constrained.

Logistics demand remains healthy but is normalising

Following an exceptional run, the logistics sector is settling into a more sustainable pattern. Vacancy rates have ticked up modestly, and demand is broadening beyond e-commerce to include sectors such as manufacturing and supply chain consolidation. While capital values may be cooling slightly, rental levels remain well supported provided the space meets the expectations of the modern occupier.

Design, location, and energy efficiency are now central to performance. Legacy stock is at risk of obsolescence without meaningful investment.

Retail finds resilience in key locations

Despite long-term structural challenges, there are signs of stabilisation in retail. Footfall has improved in prime locations – particularly in London and strong-performing regional high streets – and retailers have adapted to changing consumer behaviour.

The lack of new retail development is helping to support rents, and landlords are repositioning assets where possible to reflect hybrid models of use. Retail may no longer be a growth engine, but it is showing durability in the right areas.

Constrained supply is supporting rental growth

Across all sectors, limited new development is driving rental resilience. High build costs, tight planning conditions, and sustainability standards are all acting as brakes on supply. In the short-term, this is supporting income and reducing vacancy risk – particularly for upgraded existing stock.

However, it also raises questions about long-term supply-demand balance. If investment into new space does not return, the market risks stagnation rather than expansion.

The views and opinions expressed are those of the individual participants and do not necessarily reflect the official policy or position of Arbuthnot Latham.