Investment Quarterly | Q2 2026

UK commercial property investment stayed steady in Q2 2026, despite tensions in the Middle East and wider economic uncertainty. Clearer pricing and more stable financing helped support investor confidence. Investors continued to focus on high-quality assets and sectors with strong occupier demand.

A total of £10.9bn was invested in UK commercial property in Q2 2026, broadly unchanged from the previous quarter and in line with recent quarterly norms. Transaction activity remained subdued, with 351 deals completed during the quarter, marginally fewer than in Q1 and well below the level recorded a year earlier, suggesting that the improvement in investment volumes has been driven by a relatively small number of larger transactions rather than a broad-based recovery in deal activity.

The rolling annual investment total increased to c.£49bn, its highest level since Q1 2023. While this points to improving capital deployment, activity remains below the longer-term 10-year average, and the low number of transactions suggests market liquidity is still relatively constrained.

London accounted for around 35% of total investment, excluding multi-regional portfolio deals. This was slightly above the 34% recorded in Q1 2026 and in line with the five-year average. Offices and alternative assets attracted the most investment in London, while industrial investment fell compared with the previous quarter. Overseas investors accounted for 46% of capital invested in London, up from 42% in Q1 2026.

Regional markets, meaning the UK outside London, accounted for 65% of total investment. The East of England saw the highest level of investment outside the capital, with around £467m purchased, followed by the South East with around £427m.

Sector performance varied widely in Q2 2026. Investment in the main commercial sectors stayed below their five-year quarterly averages. Industrial was 54% below average, retail was 47% below, and offices were 25% below. In contrast, alternative sectors performed strongly, with volumes 43% above the five-year average. This shows continued investor demand for sectors offering resilient income and strong long-term fundamentals.

Office

Office investment was just under £2.5bn in Q2 2026. This was 21% lower than the previous quarter, 19% lower than a year earlier and 25% below the five-year quarterly average. Large deals helped support activity, but overall investment was weaker than at the end of 2025. Four deals were worth more than £100m, including two above £200m and one above £500m. Investors continued to prefer high-quality offices and assets that could be refurbished or redeveloped.

Most of the biggest deals were in London. Barclays bought its headquarters at 1 Churchill Place for £750m. Deka Bank bought 5-7 Carlton Gardens for £215m, with a net initial yield of 5.3%.

Investment outside London was weaker, but there were still some important regional deals. Seven Cities bought Hodge House in Cardiff for £31.9m, the largest regional office deal of the quarter, with a net initial yield of 8.7%. Longstock Capital bought Victoria Square House in Birmingham for £24.4m, with a net initial yield of 12.8%.

Industrial

Industrial investment totalled £1.4bn in Q2 2026, down from £2.4bn in the previous quarter. Volumes were also 37% lower year-on-year and 54% below the five-year quarterly average. One of the largest deals was ICG’s £200m purchase of a distribution warehouse portfolio across England, reflecting a net initial yield of 5.5%. EQT Real Estate also bought six industrial assets totalling 1.6m sq ft from Tritax Big Box for £190m, reflecting a net initial yield of 6%.

Retail

Retail investment totalled just over £1bn in Q2 2026. This was down 27% from the previous quarter, 54% year-on-year and 47% below the five-year quarterly average. Several large deals involving prime retail assets and retail parks supported volumes. Realty Income Corporation bought a portfolio of eight retail parks for £260m, reflecting a 7.7% yield. A joint venture between GPY and Ropemaker Properties sold 103-113 Regent Street for £52m, reflecting a net initial yield of 7.2%.

Alternatives

Investor interest in the living sectors remained strong in Q2 2026, supported by resilient income and long-term demographic demand. Investment across alternative sectors totalled around £6bn during the quarter. This was up 49% from the previous quarter and 43% above the five-year quarterly average. Activity was supported by several major deals across the BTR, healthcare and hotel sectors.

The largest direct property deal of the quarter was Blue Owl Capital’s £1.37bn purchase of 12 hospitals across England and Scotland. Another major deal was the acquisition of the Metra Living private rented sector platform by a joint venture between Morgan Stanley Real Estate Investing and Ridgeback Group. This had an enterprise value of £1.045bn and was excluded from the investment totals because of its corporate structure. The portfolio included around 3,200 build-to-rent and private rented homes across 52 schemes in Greater London, as well as the operating platform and associated debt.

Elsewhere, Greystar Real Estate Partners bought a portfolio of 904 apartments at Elephant & Castle. In the hotel sector, Lifestyle Hospitality Capital Group, with Aendre, bought three hotels in South Kensington, Belgravia and Covent Garden for £331m. Fattal Hotels also bought Hotel Saint in Aldgate for around £130m, reflecting a net initial yield of 5.5%.

Overseas Investment

• Overseas investment in UK commercial property totalled £5.8bn in Q2 2026, up 16% quarter-on-quarter and just 2% below the five-year quarterly average. It accounted for 53% of total investment, exceeding the 10-year average of 51%.

• US investors retained the largest share of overseas investment in Q2 2026, totalling around £3.9bn, up from £1.4bn in the previous quarter. Notable deals included Blue Owl Capital’s acquisition of 12 hospitals for £1.37bn and Realty Income Corporation’s £260m purchase of a portfolio of retail parks.

• Canadian investors have also been active in the second quarter, with Quad Real’s £120m acquisition of 241 BTR units in Woolwich, London.

• European investors have also been active, spending around £750m in Q2 2026. For example, the German Deka Bank acquired 5-7 Carlton Gardens for £215m, while Swiss Life AM, in a joint venture with Homes England, purchased a development site on Chapeltown Street for circa £40m.

The outlook from Ali Rana, Head of National Investment

As we move into the second half of the year, uncertainty has once again moved to the forefront of investors' minds. Escalating tensions in the Middle East have increased volatility across global markets and raised concerns that higher energy prices could place renewed upward pressure on inflation. While UK interest rates are still expected to trend lower, a more uncertain inflation outlook may encourage the Monetary Policy Committee to adopt a more cautious approach to future rate cuts.

The UK also enters a new political chapter following the appointment of a new Prime Minister, marking the latest change in national leadership after a prolonged period of political turnover. For property investors, political stability and policy certainty are often more important than the policies themselves. Markets can adapt to policy change, but periods of uncertainty typically delay decision-making, investment and transaction activity. The market will now be looking for greater clarity and consistency from the new government to help reinforce business and investor confidence.

Seasonal factors are also expected to influence activity over the coming months. Transaction timetables are likely to lengthen as investors, lenders and advisers navigate the summer holiday period, although this appears to reflect timing rather than weakening appetite. Capital remains available, with investors continuing to target well-priced opportunities across sectors supported by strong occupational fundamentals and resilient income characteristics.

Looking further ahead, pricing has broadly stabilised, financing conditions have continued to improve and investor confidence is gradually rebuilding. The office market remains polarised, with prime, ESG-compliant assets continuing to outperform while secondary buildings present selective value-add opportunities. Industrial and logistics fundamentals remain underpinned by healthy occupier demand, retail continues to attract renewed investor interest following significant repricing, and the living sectors remain supported by chronic housing undersupply and resilient rental growth.

Although geopolitical risks are likely to remain elevated, the overall investment backdrop is more constructive than it was a year ago. For investors able to look beyond near-term volatility, opportunities continue to emerge across all major sectors, particularly where strong occupational fundamentals support sustainable long-term income growth.