Hertfordshire Office Market Insights Q2 2025

The Hertfordshire office market continues to experience subdued activity, shaped by evolving workplace strategies, economic headwinds and the enduring effects of the post-pandemic landscape. Leasing volumes over the past 12 months reached approximately 505,400 square feet across 30 transactions. This represents a significant decline from the 10-year average of 258,000 square feet annually, reflecting caution among both occupiers and investors.

Despite muted demand, a number of core locations have remained resilient. Watford, St Albans and Three Rivers accounted for the bulk of transactional volume, driven by occupiers prioritising Grade A space and buildings with strong ESG credentials. The regional vacancy rate remains elevated, particularly in older or lower-spec stock that fails to meet current tenant expectations for energy efficiency, wellbeing and amenity provision.

Rents have generally held steady, with small increases noted in submarkets where supply of high-quality stock is tight. New-build and comprehensively refurbished space continues to attract the strongest interest. Meanwhile, landlords of secondary buildings are facing growing pressure to offer increased incentives or reposition assets entirely. Across the market, lease lengths remain shorter, and break clauses more prevalent, reflecting heightened occupier caution.

In the investment market, activity has picked up modestly but remains below historical norms. Total office investment volume in Hertfordshire over the past year reached £63.2 million, down from £158 million the year prior. This also compares to a 10-year rolling average of £258 million. Investor sentiment remains cautious, tempered by elevated borrowing costs and ongoing structural challenges facing the office sector.

The average yield across all Hertfordshire office transactions was 9.4 percent, with a wide spread ranging from 8.3 percent to 13.0 percent depending on asset quality and leasing status. The average sale price per square foot stood at £198, with deals ranging from £121 per square foot for older buildings to £1,300 per square foot for prime, boutique assets.

Key transactions included Corum’s £20.4 million acquisition of 40 Clarendon Road in Watford at an 8.3 percent yield. The property, refurbished in 2020 and let to tenants including PwC, was sold by Columbia Threadneedle as part of a broader strategic disposal of office assets. In St Albans, Legal & General Investment Management, acting for BMW Pension Trustees, acquired 10 Bricket Road for £20.6 million. This BREEAM Excellent-rated building is let to Motor Fuel Group, St James’s Place and Aecom, with a small amount of vacant space. The deal reflected a 7.3 percent yield and underscores investor preference for energy-efficient, modern buildings with strong covenants.

Owner-occupier activity has been an important source of liquidity, particularly at sub-£20 million lot sizes. Notable examples include Affinity Water’s purchase of its Hatfield HQ for around £18 million, Poeticgem’s £8.4 million acquisition of 54 Clarendon Road, and Village Hotels’ £3.1 million purchase of an office on Centennial Avenue, Elstree. These deals reflect the continued appeal of strategic freehold control for businesses with long-term operational needs.

Across submarkets, Watford Central recorded the highest volume, with £20.6 million transacted over two deals. St Albans followed with £16 million across eight deals, and Three Rivers saw £11.75 million over two large transactions. Yields were most compressed in Watford and Three Rivers (8.4–8.7 percent), while secondary towns such as North Hertfordshire and Broxbourne saw yields exceed 10 percent, reflecting increased risk and weaker demand.

Conversion and redevelopment plays have featured strongly in recent activity. Several vacant office assets have been acquired for alternative use strategies, including residential or hotel redevelopment. For example, Oakmont Homes acquired 63–77 Victoria Street in St Albans for £5.5 million for a likely change of use, while Holywell Hill’s Building 2 sold for £6.2 million with similar plans.

Looking forward, pricing is expected to remain under pressure for non-compliant or vacant assets, while prime stock will likely retain value. ESG factors, tenant covenant strength and flexibility of design remain critical to underwriting decisions. With limited new development in the pipeline and modest occupier demand, investors are expected to remain selective, focusing on opportunities offering long-term repositioning potential or secure income profiles.

If you’re interested in how Nicholas & Co. Surveyors can help you, please contact us today.

Telephone: +44 203 633 5370 / +44 1992 939 201

E-Mail: enquiry@nicholassurveyors.com