Office refurbishment demand rises despite sharp decline in project starts

The UK office construction sector is navigating a transitional period marked by steep annual declines in new activity but growing momentum in refurbishment and flexible workspace demand.

According to the latest Glenigan Construction Review (May 2025), new project starts, contract awards, and planning approvals all fell significantly year-on-year. However, strong interest in refurbishment and flexible office solutions, particularly in London, hints at evolving market priorities shaped by sustainability targets, hybrid work trends, and supply constraints.

New office projects fall across all stages of development

• Project starts have dropped by 51% year-on-year, reflecting continued caution among investors and developers.
• Main contract awards are down by 52%, showing a reduced flow of projects progressing to delivery.
• Detailed planning approvals decreased by 44% compared to 2024 levels.

These figures signal a hesitant pipeline in traditional office development as stakeholders recalibrate their strategies in the wake of economic pressures and shifting occupier needs.

Refurbishment demand grows in London amid supply shortfall

London continues to lead in value-add investment activity. According to Knight Frank’s Sustainability Series (Part 3):

• 45% (or £2.8bn) of London’s office investments are in refurbishment or retrofit projects.
• There’s an expected shortfall of 7.6m sq ft in new and refurbished office space over the next five years.
• Over 33m sq ft of leases with EPC-C ratings or lower will be up for renewal by 2030, creating urgency for sustainable upgrades.

Key Projects:

• Milton Gate, EC1 (Glenigan ID: 23286508) – A 39,000 sqm refurbishment by Brookfield Property, designed by AHMM (pictured).
• 60 Queen Victoria Street, EC4 (Glenigan ID: 24016234) – A 10,683 sqm extension and retrofit by Sheppard Robson for DWS.

Flexible space demand surges in Q1 2025

Savills’ Workthere reports a 40% quarter-on-quarter increase in demand for flexible office space in London, with the City and Southbank submarkets seeing growth of over 50%.

Recent Openings:

• X+Why, Bloomsbury – 2,000 sqm (Metropolis ID: 284279)
• Work.Life, Farringdon – 2,970 sqm (Metropolis ID: 283988)

This surge reflects occupiers’ preference for agility, shorter lease terms, and service-led work environments.

Occupier strategies shift as attendance rises

Recent research from Irwin Mitchell (May 2025) highlights a reassessment of pandemic-era downsizing:

• Nearly half of the surveyed firms plan to expand their office footprint within 12–18 months.
• 50% will do so by reconfiguring existing space, while 23% plan to relocate.
• 44% are exploring flexible workspace integration.
• Only 10% intend to reduce space.

Occupancy is climbing, with 72% of employers already seeing increased attendance. Growth is especially strong in London (81%) and the North West (71%).

Office developments progress beyond the Capital

While London dominates in refurbishment, other UK regions are seeing progress in new office schemes:

• Blackpool – Vinci has broken ground on a new 7,630 sqm MoD office at Talbot Gateway (Glenigan ID: 24161502).
• Oxford – Bowmer & Kirkland secured the contract for Project Fabrica, a 17,000 sqm R&D hub for BentallGreenOak and Mission Street (Glenigan ID: 22275790).

Outlook

The outlook remains cautiously optimistic, with activity expected to track alongside economic recovery and policy developments. While new project activity is subdued, occupier demand, refurbishment opportunities, and sustainability-driven upgrades continue to reshape the office sector’s trajectory.

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