The UK’s working age population is projected to decline over the next two decades, with around 370,000 fewer people aged 15–64 by 2040. On the surface, this could spell challenges for the economy and for property markets that depend on employment growth. Yet the picture is more nuanced. While the national trend points to a gradual decline, many of the UK’s major cities are expected to see strong growth in their working population, a shift that could reshape demand across office, residential and mixed-use real estate.
A National Challenge with a Local Story
A smaller working age population means fewer people contributing to economic output, potentially leading to slower growth and tighter labour markets. For the real estate sector, this could translate into weaker demand for office space, particularly given the rise of hybrid working. However, according to analysis by CBRE, major regional cities such as London, Manchester and Edinburgh are set to buck the national trend, with growth of 13%, 12% and 10% respectively by 2040.
This growth should help sustain office demand, particularly in vibrant, well-connected urban centres. While the average space requirement per worker has fallen due to flexible working patterns, more people in these cities will help balance that out. There are also signs that office attendance is rebounding, with more workers returning at least part of the week. The shift back toward collaboration and face-to-face interaction suggests the office remains central to business culture and productivity.
Cities as Engines of Resilience
As working populations in major cities expand, businesses are likely to consolidate around urban cores. This concentration not only supports office markets but also bolsters nearby retail, leisure and hospitality sectors, as workers continue to spend in local economies. Out-of-town business parks may need to adapt or relocate closer to population hubs to remain viable.
Cities such as Manchester, Bristol and Birmingham, with growing talent pools and diverse economies, are positioned to attract further investment and high-value employment. For investors and developers, this suggests a continued focus on city-centre regeneration, modern office design and mixed-use spaces that cater to changing work and lifestyle patterns.
The Not-So-Small Role of Policy
Government policy will also play a critical role in shaping the landscape. The Levelling Up and Regeneration Bill aims to reduce regional inequalities by boosting skills, productivity and opportunity across the UK. If successful, this will help strengthen local economies and encourage more people into the workforce.
Meanwhile, the gradual increase in the state pension age; rising to 68 by the mid-2040s could help offset the demographic shift by keeping people economically active for longer. With nearly four million people projected to be aged 65–69 by 2040, even modest participation from this group would make a meaningful difference to the size of the workforce.
The Hidden Risk is Economic Inactivity
The greater challenge may lie not in demographics but in participation. The UK has seen a sharp rise in economic inactivity, particularly among people experiencing long-term illness or disability. More than 8.7 million working-age adults are now outside the workforce, a figure that has risen by nearly half a million since 2019. Unless addressed, this could weigh heavily on productivity, tax revenues and property demand alike.
The headline decline in the UK’s working age population conceals a more complex reality. While demographic pressures are real, the concentration of growth in major cities, combined with targeted policy and an ageing but active workforce, offers reasons for optimism.
For the property sector, resilience will come from understanding these regional differences; investing where populations and economies are strongest and adapting portfolios to meet the evolving needs of urban life. In short, the UK’s demographic shift is not the end of growth, but an invitation to rethink where and how it happens.
