How global pressures are reshaping office Leasing

10th July 2025

Kevin P’ng, Managing Director at BW: Workplace Experts, shares his expert opinion on how global pressures are reshaping office Leasing.

After a prolonged period of uncertainty, the commercial office market is showing early signs of recovery. Leasing volumes are edging back towards pre-pandemic levels, buoyed by easing interest rates, a measured return of investor confidence, and a resurgence in occupier demand. But the dynamics shaping this new cycle have shifted significantly.

Cost volatility, persistent supply chain friction, and tightening ESG expectations are now reshaping how offices are delivered and, crucially, how they are leased.

Market influences

The economic aftershocks of global conflict continue to destabilise the construction supply chain, which is directly influencing new office project viability, leasing strategy and speed to market.

Over the past year, crude oil prices have risen by more than 25%, with geopolitical tensions in the Middle East, particularly between Israel and Iran, amplifying pressure on fuel costs and international logistics.

The cost of insuring goods shipped through the Strait of Hormuz has more than tripled in recent months, adding substantial premiums to materials already vulnerable to price fluctuation. Steel, plasterboard, and glass, which are all energy-intensive to produce, have been particularly affected, as have other key systems like lighting, AV, and digital infrastructure, all of which rely on internationally sourced components.

For landlords, these risks are not hypothetical. They shape what offices can be built, when, and at what cost. Early contractor engagement, proactive supplier alignment, and a willingness to build procurement resilience into the design phase can help mitigate exposure.

At the same time, structural labour shortages are placing sustained upward pressure on costs. The UK’s commercial real estate and construction sector is operating with a significant skills gap, and labour inflation is now a persistent feature of the market, projected at 6-8% annually.

Combined with material volatility, this is keeping tender price inflation in the 5-6% range through 2026 – figures that landlords and investors cannot ignore. Delivery costs now play a material role in asset planning and leasing feasibility, particularly in a market where tenants are demanding certainty, speed, and quality without tolerating cost surprises.

(Read more on cost pressures in our recent Workplace Market & Supply Chain research report.)

ESG pressures

Layered onto this is the continued rise of ESG compliance as a non-negotiable in office leasing. Achieving BREEAM ‘Very Good’ or ‘Excellent’ certification can add 1.5-3% to capital cost, while targeting ‘Outstanding’ may require a 4-5% uplift. Similar cost bands apply for WELL and FITWEL ratings.

While these premiums can often be offset by long-term operational savings, through energy efficiency, wellness-linked productivity, or enhanced asset performance, the initial investment is stark. But so is the market reward.

Occupiers are actively seeking space that reflects their own ESG commitments, and those unable to meet these standards risk falling out of the consideration set altogether.

Leasing strategy trends

What does this all mean for leasing strategy? A noticeable trend is the move towards shorter, more agile lease terms. Five-to-seven-year commitments are fast becoming standard, as occupiers prioritise flexibility, not only in term length but in physical configuration and financial structuring.

This reflects a broader shift in mindset. In a more volatile operating environment, tenants want to limit their exposure while retaining the ability to adapt. For landlords, this means designing spaces that are not just high spec, but also reconfigurable. This further means developing delivery models that can accommodate tenant input without jeopardising programme certainty.

It also reinforces the growing appeal of the ‘destination office’. With return-to-office strategies still evolving, occupiers are leaning into quality by choosing buildings that offer not just compliance, but an experience. Offices with high ESG ratings, robust digital infrastructure, hospitality-style amenities, and human-centric design are leasing faster and commanding stronger terms. Conversely, buildings that lack flexibility, modern systems, or a clear sustainability narrative are at increasing risk of voids or high incentive costs.

In response, many developers are rethinking procurement. Traditional single-stage tendering, while still appropriate in certain contexts, can expose projects to fixed-cost assumptions that quickly date in a shifting market. In parallel, the two-stage approach, which allows for earlier contractor input, is gaining traction.

It is not without inefficiency, however, particularly where design development becomes protracted or value engineering is poorly structured. The most effective models are now hybrid in nature: blending the transparency and early engagement benefits of two-stage with the pace, accountability and competitive tension of single-stage. Done well, this approach can streamline design, de-risk delivery, and offer tenants greater confidence, all of which support leasing momentum.

2026 and beyond

Ultimately, landlords must consider procurement resilience, ESG delivery, and programme certainty as integral to commercial performance – not simply technical inputs.

Locking in prices for vulnerable material packages, designing with flexibility in mind, and specifying pre-approved alternatives all offer practical routes to safeguarding office delivery and leasing certainty. These strategies are already proving essential, particularly for landlords aiming to deliver space into a competitive market without absorbing margin erosion.

In a market defined by shifting demands and heightened scrutiny, successful leasing is no longer just about offering space. Instead, it’s about offering clarity, capability, and alignment. The next generation of office tenants is arriving with sharper expectations and a more complex brief. Those who can respond with flexibility, transparency, and forward-thinking delivery models will be best placed to capture demand and to lead.

Article originally featured in Estates Gazette.