Decline in Office Construction Output Continues into 2026

Overview of the Decline

The UK office construction sector has experienced a notable downturn, with output falling by 20% in 2025. This decline has continued into 2026, raising concerns among industry stakeholders about the future of office space development.

Current Construction Output Statistics

In 2025, total construction output across London and major regional cities reached £10.2bn. However, the first five months of 2026 have shown a stark contrast, with only 152 office construction contracts awarded, valued at £2.7bn. This marks a decrease from 185 contracts worth £3.9bn during the same period in 2025.

Completion Rates and Vacancy Levels

Predictions for 2026 indicate that only 694,000 sq ft of office space will be completed across the nine largest regional cities. This figure is significantly lower than the average of 2.2m sq ft completed annually from 2020 to 2024. Additionally, vacancy rates for city-core grade-A offices are concerningly low, standing at just 2.2%, with the City and West End seeing availability drop below 0.5% by the end of 2025.

Rental Trends

Despite the falling construction output, average prime rents in the UK have seen an increase. By the end of 2025, average prime rents exceeded £100/sq ft for the first time, reaching £105.26/sq ft, which represents a 6.8% increase year on year. In the West End, rents surged to £166.61, up 6.1% from 2024.

Broader Construction Sector Performance

The overall construction sector is also facing challenges. According to the Office for National Statistics (ONS), construction output decreased by 0.3% in the three months leading up to October 2025. In Q4 2025, output fell by 2.1% compared to the previous quarter, with new work down by 2.6% and repair and maintenance dropping by 1.5%. The only sector that did not experience a decline was private commercial work.

Future Outlook

With the current trends, the outlook for office construction remains uncertain. As new work output continues to decline and vacancy rates remain low, many industry experts are questioning whether the gap in office supply will close anytime soon. The significant decrease in new orders, which fell by 3.8% (£469m) in Q4 2025, further underscores the challenges that lie ahead for the construction industry.

In conclusion, while rental prices for prime office space are on the rise, the ongoing decline in construction output and new contracts suggests a cautious approach is needed moving forward.