Quarterly Review: Q2, 2025
The softness in world trade through the year has been largely due to the reversal of early tariff front-running. The latest data show that world trade has not collapsed in the wake of renewed tariffs, albeit that an underlying slowdown remains in prospect. With inflationary pressures easing, monetary policy is set to loosen across the developed world, including in the US.
After a weak start to the year, Central London office take-up recovered in Q2, up 28% on Q1 and marginally higher than a year earlier. But that left the four-quarter mean around the level it has been since the end of 2023 and below the pre-pandemic average. Around 6.8m sq. ft. of London office space has been or is planned to complete in 2025 with 5.8m sq. ft. more in 2026, though the pipeline is less full beyond.
Regional office take-up was 1.6m sq. ft. in Q2, a sharp decrease on Q1. But overall H1 demand was its strongest since 2019 and ahead of the 10-year average. Cities significantly outperforming included Bristol, Manchester and Newcastle. Despite solid take-up, availability in the Big Nine has increased further over the past three months to exceed the highest levels in almost a decade.
Retail vacancy across the Prime West End saw an increase in Q2, but remains exceptionally tight compared with the long-term average. This limited supply is translating into strong rental growth. Logistics take-up totalled 6.7m sq. ft. in Q2, the highest level in a year. But recent underlying activity is more in line with pre-pandemic occupier demand than the elevated rates between 2020-22. And solid demand has not prevented a steady rise in availability.
Outside Central London, office investment remained weak in Q2, standing at roughly half its trend levels at just £600m. By contrast, shopping centre activity rebounded in Q2 and was 24% above the five-year quarterly average. Figures may improve in Q3 too, with several centres under offer and with the potential sale of the Intu stake in the Manchester Arndale.