Construction fell to its lowest level in 10 years

Commercial property development in the UK has fallen to its lowest level in more than a decade, as tighter monetary conditions and low demand continue to weigh on construction.

According to new analysis from Costar, just 68 million square feet of office, industrial and retail locations were under development at the end of September, down 16 percent compared to the same period last year and 34 percent lower than the 2022 peak of 103 million square feet.

This slowdown – which has brought commercial development to its lowest point since 2014 – is particularly pronounced in the retail sector, where the 3.2 million square feet of real estate under construction is less than a quarter of the peak reached in 2017.

Mark Stansfield, Costar’s director of UK analysis, said the figure was “the weakest margin of the century”.

“High vacancy rates, weak lending conditions and the perception that the UK is doing too much retail have deterred developers from creating new retail space,” he added. “It is true that some health centers will be removed from stock through conversion or reuse, with net shipments likely to be negative in the coming years.”

A weak rental market has also led to a slowdown in new warehouse construction. In September, the number of warehouses built was 16 percent less compared to the same time last year, and 37 percent fewer than during the peak period in early 2022.

Construction slumped despite Labor efforts

The slump comes despite a push by ministers to raise development levels across England amid fears that a poor and dysfunctional planning system will stifle economic growth.

Housing Minister Steve Reed has co-opted ‘build it, baby, build it’ – a term that was a first AM City campaign – as his mantra in an effort to bypass rules and regulations that hinder development.

But the recent overhaul of planning laws – as well as the easing of monetary policy in the last two years – has not been successfully applied to new commercial construction projects.

Office development was also found to be in decline, down a quarter from its peak in 2022. The sector has been shaken by a combination of higher interest rates, rising construction costs and an uncertain demand outlook, as companies reevaluate their physical footprint in the wake of the pandemic.

“Data regarding national construction starts does not suggest any short-term improvement in any sector,” Stansfield added. “Developers broke ground on 5.9 million square feet in the office, industrial and retail sectors in the third quarter of 2025, the weakest number since the financial crisis in 2012.”