UK Commercial Real Estate Market to Reach USD 177.40 Billion by 2030, Driven by Logistics Demand

Mordor Intelligence has published a new report on the UK Commercial Real Estate Market, offering a comprehensive analysis of trends, growth drivers, and future projections.

The United Kingdom's commercial real estate market is forecasted to reach USD 177.40 billion by 2030, driven primarily by strong demand for logistics spaces fueled by e-commerce growth. As businesses continue to expand their online operations, the need for efficient and high-quality logistics spaces has significantly increased, contributing to this market's projected steady growth over the next five years.

Introduction

The UK commercial real estate market is entering a phase of growth, with its value expected to rise from USD 148.80 billion in 2025 to USD 177.40 billion by 2030, reflecting a compound annual growth rate (CAGR) of 3.58%. This growth is primarily driven by the rising demand for logistics and warehouse spaces, as e-commerce continues to reshape the retail and logistics industries. The UK's strategic position as a global trade hub makes it an attractive location for investors seeking high-quality commercial assets.

As economic conditions stabilize and interest rates become more favorable, the commercial real estate market in the UK is poised for continued recovery, with an increasing focus on sustainable and energy-efficient buildings. Several trends are emerging in response to changing business needs, technological advancements, and environmental concerns.

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Key Trends Shaping the Market

The UK commercial real estate market is undergoing significant changes, with key trends driving its future direction. These include:

E-commerce and Logistics Demand: The rapid growth of e-commerce has led to a heightened demand for logistics spaces, particularly warehouses that cater to the needs of online retailers. Demand for logistics real estate is outpacing pre-pandemic levels by 8%, and this growth is expected to continue with an anticipated 4.7% CAGR for logistics properties through 2030. Major retailers are looking for strategically located distribution centers to optimize their supply chains, resulting in significant investments in logistics hubs across the UK.

Energy-Efficient Office Spaces: Increasing regulatory pressure and a growing emphasis on sustainability are pushing businesses to seek energy-efficient office spaces. With regulations around Energy Performance Certificates (EPCs) becoming stricter, the demand for office buildings that meet high sustainability standards is rising. As a result, the market is seeing a "flight-to-quality" where tenants are opting for modern, energy-efficient properties that help them meet their corporate environmental goals. This trend is particularly prominent in major cities such as London and Manchester.

Data Centers and Life Sciences: Institutional investors are diversifying their portfolios into specialized real estate assets such as data centers and life sciences facilities. The demand for data storage and processing capabilities is growing rapidly as businesses rely more on cloud computing and data analytics. Similarly, the life sciences sector is witnessing increased interest, with dedicated real estate solutions emerging to support the growing demand for research, development, and healthcare facilities.

Regional Growth Shifts: While London and the South East continue to dominate, regional markets are experiencing faster growth. Cities like Edinburgh and Glasgow are seeing an influx of investments in office, retail, and logistics sectors, driven by lower entry costs and a robust local economy. This shift towards regional growth is expected to continue, with Scotland leading the charge with a projected 4.8% CAGR in the coming years.

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Market Segmentation

The UK commercial real estate market is segmented into various property types and business models, each serving specific needs in the economy:

By Property Type:

Office Spaces: Representing a substantial portion of the market, office spaces remain a key asset, with grade-A offices in London seeing high demand due to increasing tenant requirements for modern, flexible workspaces.

Logistics: Expected to expand the most, logistics properties are benefiting from the boom in e-commerce, with continued growth in demand for warehouse spaces, especially in key distribution hubs.

Retail and Other Sectors: The retail segment is recovering post-pandemic, although it faces challenges from e-commerce competition. Additionally, sectors like industrial and hospitality are emerging as significant contributors to the market.

By Business Model:

Sales: The sales model remains dominant in the market, driven by a strong appetite for real estate investments from institutional investors and private buyers.

Rental: The rental market is seeing growth, with businesses increasingly seeking flexible leasing options, particularly in office and industrial spaces.

By End-User:

Corporates and SMEs: Corporations continue to lead demand for office and logistics spaces, focusing on quality, location, and sustainability in their real estate choices.

Individuals/Households: The investment in commercial properties by individuals, particularly for personal or retirement portfolios, is growing steadily, driven by the appeal of stable, long-term returns.

By Geography:

England: Continues to dominate the market with over 78% of the commercial real estate assets, although regional markets are growing faster.

Scotland: Expected to experience the fastest growth, with both demand for office spaces and logistics properties increasing, particularly in cities like Edinburgh and Glasgow.

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Key Players in the Market

Several major players are instrumental in shaping the UK commercial real estate market, with both domestic and international firms leading the charge:

Land Securities Group PLC: One of the largest commercial property developers and investors in the UK, specializing in prime office spaces and retail properties across London and other major cities.

Segro PLC: A leader in the logistics sector, Segro focuses on industrial and warehouse spaces across the UK and Europe, capitalizing on the e-commerce-driven demand for logistics hubs.

British Land: Engaged in the development and management of a diverse portfolio, including office spaces, retail, and mixed-use developments in key urban areas.

Derwent London: Known for its portfolio of office spaces in central London, with a focus on properties that cater to creative and technology-driven businesses.

Hammerson PLC: Specializing in retail property investment and development, Hammerson's portfolio includes shopping centers and retail parks across the UK.

These companies are adapting to the growing demand for sustainable, energy-efficient properties while diversifying their portfolios to include logistics, life sciences, and data centers in response to emerging market needs.

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Conclusion

The UK commercial real estate market is set for steady growth through 2030, driven by the increasing demand for logistics spaces, particularly due to the continued rise of e-commerce. As the market diversifies and adapts to new trends, such as sustainability and specialized asset classes, the commercial real estate sector remains a key driver of the UK economy. With increasing investments in energy-efficient office spaces and emerging sectors like data centers and life sciences, the future of the market looks promising. As regional markets continue to expand, investors are well-positioned to benefit from this evolving landscape.

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