Investment Quarterly Q1 2026

UK commercial property investment volumes moderated in Q1 2026 following a strong Q4 2025, reflecting seasonal normalisation. Industrial and office activity eased but remained the primary drivers of turnover, while retail softened and alternatives were broadly stable. Although the escalation of conflict in the Middle East weighed on investor sentiment, it occurred too late in the quarter to materially impact activity, with pricing clarity continuing to support selective deployment.

Source: Carter Jonas, RCA, CoStar

A total of £10.7bn was traded in Q1 2026, representing a decline from the elevated levels seen in Q4 2025 but broadly in line with recent quarterly norms. Volumes were modestly above Q1 2025, indicating a gradual improvement in activity despite ongoing macro uncertainty. The rolling annual total increased to £48.2bn, continuing its recent upward trend but remaining below the five-year average, highlighting that while momentum is improving, the recovery in investment volumes remains uneven.

Source: Carter Jonas, RCA, CoSta

Approximately 34% of all investment occurred in London (excluding multi-regional portfolio deals), above the 32% share recorded in Q4 2025, but below the five-year average of 35%. Investors primarily targeted offices, retail and hotels last quarter, while BTR assets saw a decline. Overseas capital accounted for 42% of total capital in London, down from 57% in Q3 2025.

Conversely, investment in the regional markets (UK excluding London) accounted for 53% of the total. The South East region recorded the highest level of investment outside the capital, with circa £527m purchased, followed by the East of England with circa £380m.

Source: Carter Jonas, RCA, CoStar

In Q1 2026, alternative assets accounted for the largest share of UK investment activity at 38%. Offices followed at 28%, with industrial at 23% and retail assets at 11%. When compared with their respective five-year quarterly averages, all sectors saw activity fall below trend. Retail recorded the most pronounced underperformance, followed by industrial and offices, while alternatives were broadly in line with their longer-term average, highlighting continued resilience in structurally supported sectors despite more subdued market conditions overall.

Source: Carter Jonas, RCA, CoStar

Office

Office investment volumes eased to just under £3bn in the first quarter, representing a 29% decrease quarter-on-quarter and 15% below the five-year quarterly average. While larger lot-size activity continued, overall office volumes softened after the strong year-end uplift. Seven transactions exceeded £100m, with two deals surpassing £200m and none above £500m. Investors remained focused on high-quality offices and assets with potential for refurbishment or redevelopment.

Most of the quarter's largest deals were in London. For example, KDDI acquired 1 Clove Street for circa £250m, while Feldberg Capital purchased 45 Mortimer Street for £172m, at a net initial yield of 5%.

Despite weaker overall investment outside London, there were some notable transactions in the regions. In the largest deal of the quarter, Hermes Investment Management has acquired 4 Angel Square in Manchester for £114m, reflecting a gross yield of 6.9%, while Melford Capital purchased Waverley Gate in Edinburgh for £77.3m, reflecting a net initial yield of 8.5%.

Industrial

Industrial investment totalled £2.4bn in Q1 2026, down sharply from £4.9bn in the previous quarter. Volumes were also 25% below the five-year quarterly average. One of the largest deals was Chancerygate’s acquisition of World Freight Terminal in Manchester from Columbia Threadneedle for £155m. In another notable transaction, EQT Real Estate purchased a portfolio of two industrial assets totalling 909,000 sq ft from Prologis for £130m, reflecting a net initial yield of 5.7%.

Retail

Retail investment totalled £1.2bn in Q1 2026, down 58% on the previous quarter and 42% below the five-year quarterly average. Several sizeable transactions involving prime retail assets and shopping centres supported volumes during the quarter. Redical Holdings AG acquired Merry Hill shopping centre in Brierley Hill for £290m, a 9% yield, while Ashtrom Properties purchased Team Valley Retail World in Gateshead for £102.5m, reflecting a net initial yield of 7.5%.

Alternatives

Investor sentiment towards the living sectors remained positive in Q1 2026, underpinned by income resilience and long-term demographic demand. Investment across the alternative sectors totalled £4bn during the quarter. Volumes were broadly in line with the previous quarter and the five-year quarterly average, but 9% up year-on-year. Several BTR and hotel transactions were completed during the quarter, including the acquisition of Station Hill in Reading by Pension Insurance (PIC) for £200m at a 5% yield and ABT Capital’s purchase of Darwin Escapes Holiday Parks portfolio for £150m.

Overseas Investment

Source: Carter Jonas, RCA, CoStar

• Overseas investment in UK commercial property totalled £5bn in Q1 2026, down 36% quarter-on-quarter and 18% below the five-year quarterly average. It accounted for 46% of total investment, broadly in line with the 10-year average.
• US investors retained the largest share of overseas investment in Q1 2026, totalling around £1bn, down from £4.7bn in the previous quarter. Notable deals included Ares Management’s acquisition of 30 Berners Street for £146m and ABT Capital’s circa £150m purchase of Darwin Escapes Holiday Parks portfolio.
• Canadian investors have also been active in the first quarter, with QR CS Padlock’s circa £280m acquisition of a self-storage portfolio.
• Japanese investors have also been active. For example, KDDI acquired 1 Clove Crescent for approximately £250m.

The outlook from Ali Rana, Head of National Investment

Markets have slowed but not stalled. Capital remains active, albeit more selective, with decision-making timelines extending rather than transactions being abandoned. Pricing has held broadly steady across most sectors, with the adjustment felt more through thinner liquidity and slower execution than outright repricing. Recent geopolitical tensions have unsettled sentiment and lifted energy prices, feeding into inflation expectations, but real estate has so far absorbed this without too much disruption.

Transaction activity has become increasingly deal-specific. Strong income with genuinely robust covenant strength at realistic pricing levels continue to transact, while secondary stock remains challenged by wide bid-ask spreads. Offices and retail have proven more resilient than expected, particularly where income characteristics are defensive, while industrial has seen a softer quarter. In the UK office market, London activity picked up in March, reflecting constrained supply in core sub-markets and sustained occupier demand for high-quality space.

Debt is available but cautious, with lenders focused on asset quality, sponsor/covenant strength and conservative leverage in a more uncertain inflation and rates environment. Overall, activity appears further delayed rather than lost. With capital still present and fundamentals intact in stronger segments, there remains a clear route to improved volumes into H2 2026 if macro conditions stabilise.