Investment Quarterly Q4 2025

UK commercial property investment volumes rebounded strongly in Q4 2025, following softer activity in the previous quarter. Industrial investment rose sharply, while office and retail activity also recovered, signalling improving confidence as pricing clarity continued to build. Alternatives remained a significant source of capital deployment, reinforcing ongoing investor selectivity rather than a broad-based rebound.

A total of £17.5bn was traded in Q4 2025, representing a 78% increase quarter-on-quarter and a 13% rise year-on-year. Quarterly volumes were also around 32% above the five-year quarterly average, reflecting a strong year-end uplift in deal completion. Reported volumes exclude transactions where the real estate value cannot be robustly separated from operating business considerations, most notably Welltower’s circa £5.2bn off-market acquisition of a UK care home portfolio from Barchester. The rolling annual total edged up modestly to £47.8bn, remaining broadly stable quarter-on-quarter but still around 10% below the five-year average of £53.2bn, highlighting that while momentum improved materially in Q4, the recovery in annual volumes remains uneven.

Approximately 32% of all investment occurred in London (excluding multi-regional portfolio deals), above the 23% share recorded in Q3 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 68% of the total. The South East region recorded the highest level of investment outside the capital, with circa £3bn purchased, followed by the East of England with circa £900m.

In Q4 2025, industrial assets accounted for the largest share of UK investment activity at 31%. Offices and alternatives followed at 26%, and retail assets at 17%. When compared with their respective five-year quarterly averages, industrial and retail investment materially outperformed, sitting around 45% and 37% above trend, respectively. Alternatives were broadly in line with their longer-term average, while office investment moved back above its five-year quarterly norm (around 22% above), continuing the improvement seen through recent quarters and signalling strengthening liquidity in the sector as pricing adjusts.

Office

Office investment volumes surged to £4.2bn in the fourth quarter, representing a 148% increase quarter-on-quarter, 22% above the five-year quarterly average and the highest quarter for office investment since Q3 2022. This reflects improving liquidity in the office investment market, supported by greater pricing clarity and a renewed willingness among investors to transact on larger lot sizes. Unlike the previous quarter, nine transactions exceeded £100m, with five deals surpassing £200m and one exceeding £500m. Investors continued to target high-quality offices and assets with potential for refurbishment or redevelopment. However, despite the recent improvement in volumes, investor sentiment remains cautious, particularly outside London, where depth of demand remains selective rather than broad-based.

Most of the quarter's largest deals were in London. A joint venture between Capreon and Hayfin Capital Management acquired 70 St Mary Axe for £331.7m, reflecting a net initial yield of 5.7%, while Royal London Asset Management purchased 1 Newman Street for £250m, at a net initial yield of 4.5%.

Despite weaker overall investment outside London, there were some notable transactions in the regions. In the largest deal of the quarter, Ellison Institute of Technology acquired the new expanded west-side site at Oxford Science Park for £890m, while Ashtrom Properties purchased Fourways House in Manchester for £21m, reflecting a net initial yield of circa 7.8%. Nevertheless, several large prime developments, including Wellington Place in Leeds and Paradise in Birmingham, remain unsold, suggesting that regional office demand, while improving, may not yet be as deep or consistent as headline volumes imply.

Industrial

Industrial investment rose to £4.9bn in Q4 2025, up sharply from £2.1bn in the previous quarter. Volumes were also 46% above the five-year quarterly average, marking the strongest quarter for industrial investment in four years. One of the largest deals was Tritax Box’s acquisition of a £1bn industrial portfolio from Blackstone. In another notable transaction, Crosstree Real Estate Partners purchased a portfolio of 11 multi-let industrial assets across the UK from BlackRock for circa £400m.

Retail

Retail investment totalled £2.8bn in Q4 2025, up 87% on the previous quarter and 37% above the five-year quarterly average. Several sizeable transactions involving prime retail assets, shopping centres, and supermarkets supported volumes during the quarter. Frasers Group acquired Braehead Shopping Centre in Glasgow for circa £220m, while Blue Owl Capital purchased 10 Asda supermarket stores across the UK and one distribution Centre in Lutterworth from Asda in a sale-and-leaseback deal for £270m.

Alternatives

Investor sentiment towards the living sectors remained positive in Q4 2025, underpinned by income resilience and long-term demographic demand. Reported alternative sector volumes exclude Welltower’s circa £5.2bn off-market acquisition of a 284-care home portfolio from Barchester, reflecting the blended nature of the transaction across real estate ownership, operating income and development exposure. Excluding this transaction, investment across the alternative sectors totalled just under £4.1bn during the quarter. While volumes were 8% lower quarter-on-quarter and 24% down year-on-year, activity remained marginally above the five-year quarterly average by around 2%. Several BTR and hotel transactions were completed during the quarter, including CDL’s £280m acquisition of Holiday Inn Kensington, Spartan Advisors’ £102m purchase of the Marriott London Grosvenor Hotel, and L&G’s £160m acquisition of 737 BTR units in Manchester.

Overseas Investment

• Overseas investment in UK commercial property totalled £5.9bn in Q4 2025, up 27% quarter-on-quarter but marginally below the five-year quarterly average, accounting for 33% of total investment. US investors remained the largest source of overseas capital during the quarter. US investment volumes would have been materially higher had Welltower’s £5.2bn acquisition of the Barchester care home portfolio been included, highlighting continued US institutional appetite for UK living and healthcare assets supported by long-term demographic demand, despite a more cautious broader capital markets backdrop.
• US investors retained the largest share of overseas investment in Q4 2025, totalling around £3.1bn, up from £1.9bn in the previous quarter. Notable transactions included Blue Owl Capital’s £262m acquisition of an ASDA supermarket portfolio and Supermarket Income REIT’s £196m purchase of a further ASDA-backed portfolio.
• European investors were also active in Q4 2025, deploying approximately £1.7bn. Notable transactions included Norges Bank Investment Management’s acquisition of the London Fruit & Wool Exchange at 1–10 Brushfield Street for circa £300m, while Turkish investor Enka İnşaat acquired Park House, 16–18 Finsbury Circus, for £185m, reflecting a net initial yield of 5.7%.

Note: Reported investment volumes exclude transactions where the real estate value cannot be robustly separated from operating business considerations, including Welltower’s acquisition of Barchester care homes.

The outlook from Ali Rana, Head of National Investment

After a period of repricing, UK commercial property markets are entering a phase of stabilisation with gradual recovery supported by improved investor sentiment and modest capital growth alongside stable rental income.

The narrowing gap between buyer and seller pricing expectations is leading to improved pricing clarity and a higher likelihood of transactions completing, reflecting market adaptation to new pricing norms rather than aggressive yield compression.

Easing interest rates and active lending by UK banks are encouraging leveraged investment, with investor attention shifting from interest rates to asset quality, income durability, and long-term relevance.

Office markets show selective re-engagement favouring prime assets amid ongoing polarisation, while industrial, living (build-to-rent), and retail sectors demonstrate varied performance with industrial and living sectors attracting strong interest due to structural strengths, and retail recovering amid challenges.