Investment Quarterly
Q3 2025

UK commercial property investment volumes softened in Q3 2025, with alternatives rebounding while industrial activity edged lower. Office and retail investment fell more sharply, highlighting ongoing selectivity among investors.

Source: Carter Jonas, RCA, CoStar

A total of £9.8bn was traded in Q3 2025, representing a modest 2% decline quarter-on-quarter, 2% down year-on-year and 26% below the five-year quarterly average. The rolling annual total remained broadly in line with the previous quarter and was 14% below the five-year average of £53.2bn.

Source: Carter Jonas, RCA, CoStar

Approximately 23% of all investment occurred in London (excluding multi-regional portfolio deals), below the five-year average of 35% and the 41% share recorded in Q1 2025. Investors primarily targeted offices and alternatives such as BTR and hotels, while retail assets saw a decline. Overseas capital accounted for 57% of the total in London.

Conversely, investment in the regional markets (UK excluding London) accounted for 77% of the total. The South East region recorded the highest level of investment outside the capital, with circa £970m purchased, followed by the East of England with circa £817m.

Source: Carter Jonas, RCA, CoStar

In Q3 2025, alternative assets accounted for the largest share of UK investment activity at 46%. Industrial followed at 21%, with offices at 17% and retail assets at 16%. When compared with their respective five-year quarterly averages, only alternatives recorded an increase in investment volumes, rising 14% above the average. In contrast, offices were 52% below their five-year average, industrial volumes were down by 38%, and retail investment saw a decline of 28% relative to the five-year trend.

Source: Carter Jonas, RCA, CoStar

Office

Office investment volumes dropped to £1.7bn in the third quarter, representing a 45% decrease quarter-on-quarter and 52% below the five-year quarterly average. This reflects continued subdued activity in the market for large office assets. No transactions exceeded £100m during the quarter, with ten deals surpassing £50m. Investors continued to target high-quality offices and assets with potential for refurbishment or redevelopment.

Most of the quarter's largest deals were in London. The US-based Ares Management acquired Collingwood House for £90.6m, reflecting a net initial yield of 7.1%, while The Crown Estate purchased 100 Regent Street for £95m, at a net initial yield of 6.4%.

Despite weaker overall investment outside London, there were some notable transactions in the regions. Princess Group acquired Royal Liver in Liverpool for £57m, while a joint venture between BauMont Real Estate Capital and KZN Real Estate purchased Quartermile One in Edinburgh for £53.8m, reflecting a net initial yield of circa 6.85%.

Industrial

Industrial investment decreased by 7% quarter-on-quarter in Q3 2025 to around £2.1bn, with volumes 38% below the five-year quarterly average. One of the largest deals was Greykite’s acquisition of a portfolio of eight industrial assets nationwide for £245m. Another notable transaction was Indurent’s purchase of a 750,000 sq ft urban logistics portfolio across the Midlands for £150m.

Retail

Retail investment totalled just £1.5bn in Q3 2025, down 34% on the previous quarter and 28% down the five-year quarterly average. Several sizeable transactions involving prime retail assets, retail parks, and supermarkets supported volumes during the quarter. Hammerson acquired CPP’s remaining 50% stake in The Bullring and Grand Central shopping centres in Birmingham for £319m. PGIM Real Estate purchased Manchester Fort Shopping Park for £90.5m, while Supermarket Income REIT acquired Tesco Extra in Ashford for £54m, reflecting a net initial yield of 7%.

Alternatives

Investor sentiment towards living sectors remains positive, underpinned by income resilience and long-term demographic demand. Spending across the alternative sectors in Q3 2025 totalled just under £4.5bn, up 71% quarter-on-quarter, 38% year-on-year, and 14% above the five-year average. Several student accommodation, BTR and hotel deals were completed during the quarter. Notable deals included QuadReal’s £528m student accommodation portfolio, Barings and Greystar’s £175m 595 BTR units at Barking Wharf, and YellowTree Real Estate’s £150m purchase of The Hoxton Southwark hotel in London for £150m.

Overseas Investment

Source: Carter Jonas, RCA, CoStar

• Overseas investment in UK commercial property totalled £4.3bn in Q3 2025, up 5% quarter-on-quarter but 25% below the five-year quarterly average. It accounted for 47% of total investment, in line with the 10-year average.
• US investors retained the largest share of overseas investment in Q3 2025, totalling around £1.8bn, though down from £2.3bn in the previous quarter. Notable deals included KKR’s acquisition of a student accommodation portfolio for £230m and Greystar’s £175m purchase of 595 BTR units at Barking Wharf in London.
• Canadian investors have also been active in the third quarter, with QuadReal’s £585m acquisition of a 3,500-bed student housing portfolio.
• European investors have also completed several notable deals in Q3 25. For example, the Spanish Deva Capital Advisory, in a joint venture with Arora Group, acquired Novotel London West for £160m, while the German Sirius Capital acquired Hartlebury Trading Estate for £102m.

The outlook from Ali Rana, Head of National Investment

Concerns are mounting over the potential effects of the November Budget on the property sector, as well as the unintended consequences that could arise.

From potential wealth and mansion taxes to changes affecting limited liability partnerships, along with a reworking of business rates, planning for 2026 is proving challenging and, to a degree, affecting both investment outlook and behaviour. We have observed that several asset sales have been postponed until the start of the new year as investors await greater policy clarity.

There was no meeting of the Bank of England’s Monetary Policy Committee in October, so interest rates remain at 4.0%. Market commentary suggests that the next meeting on 6 November is also unlikely to result in a change, amid concerns over the potential inflationary impact of policies outlined in the upcoming Budget.

More broadly, economic growth is expected to remain subdued, with forecasts pointing to modest expansion through 2026. Against this backdrop, all-property rental value growth has been relatively stable, holding in a narrow band around 3.3%–3.5% for much of the past year. Capital values increased by 2.6% in the year to September, delivering a total return of 8.6%, although growth remains slightly below the current rate of consumer price inflation.

This stabilisation in underlying market fundamentals, including more predictable interest rate expectations and resilient rental performance, is providing a degree of support to investor underwriting. However, transaction volumes remain subdued ahead of the November Budget, with some activity deferred until greater policy clarity emerges. Looking into 2026, we anticipate a gradual recovery as uncertainty eases and pricing expectations continue to adjust, particularly within the industrial and office sectors.

For investors confident in the office sector, current pricing presents compelling opportunities, particularly in markets where existing supply has been significantly reduced through repurposing for alternative uses, such as residential and industrial.

Several industrial and logistics deals and portfolios are currently under offer or on the market, with yields continuing to tighten. Given limited speculative development, this trend is expected to persist into 2026, particularly for prime and energy-efficient stock.