Slower growth, but greater stability 

I’ve previously written about how the UK is due for more recognition of its relative stability as environment for commercial real estate investment relative to many of its competitors. With November’s Budget now finally out the way, in the short- to medium-term the outlook is certainly more stable than it has been for some time, and businesses and investors should now be more capable of making balanced decisions than they were six months or a year ago, and therefore move forward with decisions about transactions.

Nonetheless, the environment for economic growth remains sluggish. In a ‘normal’ cycle, this would feed through to weaker occupational demand across all the key commercial property sectors – offices, industrial and retail – however, a lack of supply and a dearth of construction activity is likely to keep demand robust. Which brings us to…

Sustained occupational activity, but choosier tenants

Occupational activity will be maintained, and rental growth sustained (unless there’s a sudden rise in tenant exits). However, we have begun to see how selective tenants are on location, with prime buildings in secondary spots proving much harder to let than would be normal in this phase of the property cycle. 

Indeed, in the case of offices, we believe that a perfect location can compensate for a less than perfect building, something that should enable developers to value-engineer plans to secure a better return. Overall, the supply-demand dynamics are keeping offices our top pick for investors in 2026, so long as they take into account the micro-market supply trends and location nuances before purchasing. 

Retail vacancy rates in dominant locations are down to cyclical lows, which delivered rental growth over 2025, although this may soften slightly in 2026 as retailers face higher operating costs. Medium-term, however, we remain optimistic about a lot of retail, and shopping centres especially are looking increasingly defensive against some wider structural macro changes.

AI and data centres winning the battle for land

2025’s newest trend was undoubtedly the AI and cloud-driven boom in demand for data centre space. While it’s garnered a lot of excitement, however, this is a sector that requires a high degree of investor expertise to assess, and we believe that the biggest impacts of the data centre boom in 2026 will be even more competition for sites.

Further information

Contact Mat Oakley

2026 cross-sector outlook