Summary
The UK commercial property investment market enters 2026 with renewed momentum.
Following two years of repricing, stabilising interest rates and moderating inflation, investor confidence across the commercial real estate investment sector is improving.
With investment volumes reaching £50.3bn in 2025 and forecast to rise further in 2026, capital is beginning to re-engage across offices, industrial, retail and alternative asset classes.
This report examines the macroeconomic backdrop, sector-specific investment trends, commercial property yields and institutional capital flows shaping the UK commercial real estate investment market in 2026.
UK Commercial Property Investment Market Outlook 2026
Introduction
Did someone fire a starting gun?
You wouldn’t be blamed for missing it.
When you consider the global economy, ongoing acts of war and questionable strategies of colonisation, it’s understandable that attention has drifted away from the commercial property market.
However, the inescapable truth is that these issues are all entwined, so it would be unwise to look away for too long.
Despite the geopolitical backdrop, UK investment agents remain broadly positive and, as 2026 gets going, our clients are increasingly looking to buy. So, are we finally out of the investment starting blocks?
Macroeconomic backdrop and impact on commercial real estate investment
The decline in the Bank of England base rate is materially influencing the UK commercial property investment market, improving debt availability and supporting pricing stability across core real estate assets.
The Bank of England base rate currently stands at 3.75% (January 2026), following a steady fall from 4.75% in January 2025, driven largely by easing inflation.
Forecasters are suggesting a further cut in March, as a response to the decrease in inflation from 3.2% to 3% in February.
As of the 28 February 2026, the US and Israel commenced Operation Epic Fury, launching a series of attacks against Iran. This has already caused a significant spike in the price of oil and gas which, ultimately, could lead to inflation increases, depending on the duration of the war. This may alter all current forecasts.
Current forecasts from Lloyds Banking Group, supported by Oxford Economics, suggest further reductions are likely, with the base rate potentially falling to around 3.25% by the end of the year.
While a total reduction of 0.5% may not sound dramatic, it is proving sufficient to unlock decision-making.
For many of our clients, this level of improvement is enough. Few expect a return to the ultra-low base rates of 0.1%, but a rate in the mid-3% range, with further modest reductions anticipated, is widely viewed as acceptable.
There are, however, broader market concerns.
UK employment fell by 135,000 in the quarter to November 2025, with unemployment now at 5.1%, the highest level since 2021. Wage growth has also moderated to 4.5% over the same period. A more fragile employment market inevitably makes investors more cautious.
Yet, despite these headwinds, there is a growing sense that the market has turned.
Will 2026 see us turn an investment corner?
We are receiving multiple calls each day from clients looking to deploy capital across our regions, some cash buyers, others geared. This renewed investment appetite is beginning to influence pricing, with yields broadly stable or potentially decreasing – measurably anticipated by Q3 2026.
Investment volumes for 2025 closed at approximately £50.3bn, broadly in line with 2024, but a significant improvement on 2023, when volumes stood at around £38bn. Direct comparisons between 2024 and 2025 are of limited value, given the clear economic improvements over the past year, particularly falling inflation and base rates.
Arguably, despite ongoing global disruption, including UK tariffs, the UK continues to present itself as a relative safe haven. Cross-border investment accounted for just under 50% of activity, and we expect this to increase further in 2026 as the UK market is perceived as a more stable environment.
Broadly speaking, this bodes well for UK property investment. Forecasting into 2026 is, relatively speaking, more straightforward than it has been for some time, even with the prevailing global challenges.
We expect an improvement in capital sales volumes this year, alongside a modest hardening of yields across all sectors, driven primarily by achieved and anticipated base rate reductions. While this is unlikely to be a year of dramatic growth, a steadily improving market feels realistic, subject, of course, to global events not taking a far more dramatic turn.
By year-end, we anticipate total investment volumes of approximately £55–56bn, with offices, retail and industrial assets all showing improvement. Notably, the office sector looks set to strengthen further, supported by rising occupier demand.
Richard Dawtrey Head of Investment Vail Williams LLP.
*Sources: Vail Williams’ transactional data, PropertyData, CoStar
UK Commercial Property Investment Volumes and Capital Trends
Office Investment Market
Office real estate investment volumes increased from £8.7bn in 2023 to £11.8bn in 2025, reflecting renewed institutional interest in prime and ESG-compliant office assets.
Occupational demand is improving from a low base. According to CoStar, the national office vacancy rate stabilised at approximately 8.8% in 2025, representing an 80 basis point reduction year-on-year.
Leasing activity increased by circa 4% as occupiers adapted to hybrid working models, typically consolidating space requirements around a three-day office attendance pattern.
Structural supply constraints are becoming increasingly apparent. New development remains limited, refurbishment costs continue to rise, and a significant proportion of existing stock is ageing and functionally obsolete. On the other hand, demand for high-quality, well-located and energy-efficient space is strengthening, supporting rental stability and selective growth.
Against this backdrop, we anticipate office investment volumes to increase by approximately 10% during 2026, with capital increasingly targeting prime and refurbished assets capable of meeting modern occupier and ESG requirements.
While this remains below long-term averages, the direction of travel is positive.
For investors, this reinforces the importance of selective allocation towards assets with strong sustainability credentials, reversionary rental potential and long-term occupational relevance.
Industrial & Logistics Investment Market
The industrial sector continues to be the investment of choice, despite the market returning to more normalised levels following the post-pandemic boom.
The vast majority of our clients are targeting this market, whether they are add-value investors or institutional funds.
Following the sudden increase in yields, and decreasing land values in 2022, we are now witnessing slow industrial yield decline and a creeping up of land values.
Secondary estates data sets show a stable yield profile nationally, but in the South East we are witnessing a slight decrease in yield (0.25 – 0.5%), depending on quality, age and EPC of stock. There remains substantial support for this market and we see this continuing.
We forecast that industrial investment volumes could increase by up to 15% in 2026, reaching approximately £12.8bn.
For investors, the sector continues to offer a compelling combination of income security, liquidity and defensiveness, particularly where assets benefit from strong location, specification and ESG compliance
Retail Property Investment Market
Retail capital investment volumes declined marginally during 2025, finishing the year at approximately £7.9bn.
Despite high expectations, consumer spending remained under pressure, with weaker Christmas trading reflecting the ongoing cost-of-living challenges, which saw discretionary expenditure deferred into January sales periods.
Occupationally, retail investment demand in regional markets remains selective.
Evidence suggests a practical rental ceiling of around £90,000 per annum for many units, beyond which occupier affordability is challenged by a combination of operating costs, business rates and margin pressures. Assets priced and configured within these parameters could continue to attract interest into 2026.
Retail sales growth stabilised at approximately 0.5% in late 2025, with year-on-year growth of 0.7%.
As inflation continues to moderate and real wages improve, we expect consumer confidence and spending to strengthen gradually through 2026, supporting increased investment activity later in the year.
For investors, this points to selective opportunities in well-priced retail assets with sustainable rents, strong local catchments and realistic occupational cost structures.
Commercial Property Investment Yields
Weighted Average (per sector)
Yields across most sectors have stabilised, with selective inward movement evident for prime and income-secure assets. Secondary stock continues to experience pressure where obsolescence or ESG risk is present.
STOCK: HIGH STREET RETAIL
STOCK: OUT OF TOWN RETAIL
OFFICE (EXCLUDING LONDON)
STOCK: WAREHOUSE/INDUSTRIAL
STOCK: ALTERNATIVES
UK Commercial Real Estate Investment Outlook 2026
The UK commercial property market now appears to be at, or close to, the bottom of the current cycle.
Pricing has largely adjusted, financing costs are stabilising, and investor confidence is beginning to return.
While 2026 is unlikely to deliver rapid capital growth, the underlying fundamentals point towards a steadily improving environment for the deployment of capital.
From an investor perspective, the key theme is improved visibility. Inflation has moved materially below its 2022–23 peak, debt markets are becoming more predictable, and asset pricing now better reflects the higher cost of capital.
Institutional Investment Themes
As a result, capital is starting to re-engage across both core and value-add strategies.
For institutional investors, the year ahead presents an opportunity to re-enter the market ahead of stronger competition.
A focus on income durability, asset quality, and future-proofing will be critical, with selective acquisition strategies aligned to long-term occupational and sustainability trends likely to deliver the most resilient returns.
Market repricing has largely completed, allowing institutional investors to re enter with greater confidence around income durability and exit assumptions.
Mispricing remains evident within secondary stock where refurbishment, re-letting or EPC enhancement strategies can materially improve risk adjusted returns.
The focus remains firmly on secure, inflation hedged income rather than short term capital appreciation, particularly in an environment of moderate economic growth.
Capital is increasingly polarised towards assets that are well-located, ESG compliant and capable of meeting modern occupational requirements.
Relative political stability, transparency and liquidity continue to position the UK as a core defensive allocation for global capital.
Market Sensitivities
While the outlook for 2026 is cautiously positive, investors should remain alert to potential risks, including:
Macroeconomic volatility
Inflation remains sensitive to geopolitical disruption, energy pricing and labour market dynamics, which could delay anticipated interest rate cuts.
Financing and refinancing risk
Although debt markets are improving, refinancing risk persists for assets acquired during the low rate cycle, particularly where income growth has underperformed.
Methodology
This report is informed by Vail Williams’ proprietary transactional data, active client mandates and live market intelligence across its regional offices, supplemented by third party data from PropertyData and CoStar. Forecasts represent Vail Williams’ house view as at Q1 2026 and are subject to change as market conditions evolve.
Occupier affordability
Cost pressures on occupiers, including business rates and operating costs, may limit rental growth in secondary locations.
ESG obsolescence
Assets with poor energy performance or limited ability to be retrofitted face accelerated depreciation and reduced liquidity.
Key contacts
London
Richard Dawtrey Partner, Head of Investment
T: +44 (0)7881 588526
E: rdawtrey@vailwilliams.com
South Coast
Russell Miller Partner, Investment
T: +44 (0)7760 171443
E: rmiller@vailwilliams.com
Ben Duly Senior Surveyor, Investment
T: +44 (0)7771 542132
E: bduly@vailwilliams.com
Russell Mogridge Partner, Investment
T: +44 (0)7815 737175
E: rmogridge@vailwilliams.com
Alex Gauntlett Partner, Investment
T: +44 (0)7584 657826
E: agauntlett@vailwilliams.com
Surrey
Maria Hoadley Partner, Investment
T: +44 (0)7584 649059
E: mhoadley@vailwilliams.com
Thames Valley Guy Parkes Partner, Investment
T: +44 (0)7788 188874 E: gsaunders@vailwilliams.com
Midlands and North Matt Cureton Associate, Investment
T: +44 (0)7786 735596
E: mcureton@vailwilliams.com
Gatwick
Mikael Goldsmith Partner, Investment
T: +44 (0)7435 829861
E: mgoldsmith@vailwilliams.com
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