Office construction output falls 20% to £10.2bn

Barbour ABI has reported a 20% fall in UK office construction output during 2025, with activity dropping to £10.2bn from a record £12.8bn in 2024. The decline follows an unusually strong delivery period and comes as developers continue to weigh high construction costs, financing conditions, and uncertainty around occupational demand.

Forward indicators are stronger than the output figure suggests. New office construction orders increased 19% during 2025 and reached their highest level since 2007, indicating that demand for future schemes has not disappeared. The shape of that pipeline has changed, however, with awards increasingly concentrated among fewer, larger projects.

The number of office contract awards fell by almost a third between 2023 and 2025. That leaves more capital focused on a smaller group of high-value schemes, particularly developments capable of delivering modern Grade A space in locations where supply remains constrained.

The concentration creates a market in which substantial individual projects can proceed without producing broad growth across the sector. Developers are prioritising buildings able to command stronger rents and attract occupiers seeking higher environmental performance, efficient building services, better amenities, and flexible workspace.

Barbour ABI expects the gap between new orders and construction output to delay a visible recovery. Historically, office new orders have taken around 12 to 18 months to feed through into output, but current economic and viability pressures could extend that lag. The company expects more meaningful new-build improvement from 2028.

Supply of prime space is helping support that pipeline. Grade A vacancy in City of London tower space has fallen to around 2%, while availability across six major regional office markets is approximately 3.6%. New-build vacancy is also close to historic lows.

Those figures reinforce the continuing flight to quality. Occupiers that are moving are frequently targeting buildings with better environmental credentials, modern plant and controls, stronger workplace amenities, and locations capable of supporting staff attraction and retention. Older offices unable to meet those expectations face greater risk of prolonged vacancy.

That divide is making refurbishment an increasingly important part of the construction market. New-build schemes still account for 74% of the office pipeline by value, but only 54% by project volume, leaving refurbishment responsible for a much larger share of individual projects than its capital value would imply.

The commercial logic is straightforward. Reusing an existing structure can reduce some elements of development cost, shorten programmes, and limit planning and demolition exposure. Where the location and structural frame remain suitable, landlords can instead concentrate investment on façades, mechanical and electrical systems, controls, lifts, interiors, and energy performance.

That does not necessarily make refurbishment straightforward. Deep retrofit can expose hidden structural, fire-safety, asbestos, services, access, and phasing risks, particularly where buildings remain partly occupied. Achieving modern operational performance in an existing envelope can also require complex coordination between fabric improvements and new building-services systems.

Energy policy is adding pressure to those decisions. Owners of older offices face increasingly demanding expectations around energy use and future minimum standards, while corporate occupiers are placing greater weight on operational performance and carbon when selecting space.

The result is a construction opportunity that sits somewhere between conventional fit-out and complete redevelopment. Mechanical and electrical contractors, controls specialists, façade companies, energy consultants, and specialist fit-out businesses can all benefit from the requirement to move existing buildings closer to Grade A performance.

For developers considering new construction, timing remains the principal difficulty. Tight Grade A supply and stronger rents can improve viability, but office projects have long development programmes and substantial capital requirements. Conditions at completion can differ sharply from those prevailing when land, design, and finance decisions were made.

The national figures also conceal large regional differences. Central London can absorb very large projects in a limited number of locations, while regional markets often depend more heavily on pre-lets, identifiable local occupiers, and individual investor confidence. A broad recovery therefore requires demand across several cities rather than another cluster of major London starts.

The 20% fall in output shows how sharply construction can retreat after a peak year. The 19% increase in orders indicates that another cycle is forming, but the reduced number of awards points towards a more selective one. Prime new builds and technically demanding refurbishments are likely to lead the recovery, while lower-quality stock faces a much less forgiving market.

For contractors, that means the next office cycle may provide less volume but greater technical intensity. The stronger pipeline is real, but the £10.2bn output figure shows it has yet to replace the workload that came off site after the 2024 peak.