England & Wales
From an economic viewpoint, the uncertainty leading up to the Autumn budget caused a frustrating second half of 2025. The impact from the budget was more modest than feared and the outlook for 2026 is one of realistic optimism and resilience as we enter what it hoped to be the next phase of the cycle. It is expected that interest rates will continue to decrease, albeit modestly, which combined with falling inflation and stabilisation of pricing, indicates that there will be increased market activity in 2026.
Notwithstanding the cautious optimism, market activity will largely depend on global dynamics, which continue to shape the market’s outlooks. In particular, the stability of the US will be a significant influencing factor along with micro-market factors.
Logistics
In the logistics sector, 2025 saw the highest leasing and investment activity volumes in three years. The outlook for 2026 indicates promising signs of increased take-up and absorption rising along with a fall in supply due to the decreasing development pipeline. These factors should cause the logistics market to level out in 2026.
The yearly baseline rental growth for the logistics sector is c.3.2% which exceeds the pre-Covid ten-year average. It is therefore expected that rental growth will remain solid in 2026.
Core capital is set for a gradual return to UK logistics in 2026, driven by falling debt costs and improved investor confidence. Expected interest rate cuts indicate further decreased debt costs which should make debt more accretive for core and core plus logistics assets.
Portfolio transactions remain a dominant feature of the logistics sector. In 2025, c.£10.5bn was invested in logistics with half of this through portfolio transactions. A number of sizeable portfolios are expected to hit the market in 2026, indicating that portfolio transactions will continue to drive logistics investment volumes.
Retail
Retail remains in the growth phase of the cycle with low vacancy rates in prime locations. This indicates rental growth although this is expected to soften in 2026 as retailers are faced with higher operating costs. In the medium-term the retail outlook remains optimistic with shopping centres looking increasingly defensive and showing signs of recovery towards the end of 2025.
Consumer confidence remains volatile due to cost-of-living concerns. However, more optimistic sentiment was translated into year-on-year retail sales growth since June 2025 and is forecasted to continue to increase in 2026.
The new business rates system announced in the 2025 budget is generally positive as it provides relief for smaller retail premises due to reduced rates albeit larger stores will face higher rates.
The retail market remains polarised, with secondary locations continuing to face challenges but a lack of stock in prime locations signalling rental growth.
Living
The macro-economic backdrop continues to support robust investment volumes for build-to-rent (BTR) in 2026. Whilst supply and demand pressures remain acute, this was somewhat rebalanced in 2025. The introduction of Assured Periodic Tenancies in 2026 may also cause increased demand and tenant mobility.
BTR pipeline weakened throughout 2025 due to viability challenges inhibiting BTR developments. Multifamily BTR will remain focused on stabilised assets with forward funding deals expected to re-emerge later in the year as viability pressures ease. It is expected that single family BTR will account for a large share of activity in 2026, with government housing ambitions creating new opportunities.
Student accommodation is expected to mirror the trends of multifamily BTR with portfolio transactions increasing across the 2026/2027 academic cycle, supported by demand for energy efficient income-producing student assets.
Offices
Office take-up in 2026 is likely to reach similar levels to 2025 as demand is expected to be constrained by a lack of Grade A office space in prime locations. A lack of new office development pipeline means pre-leasing of ongoing developments at a quicker rate than new construction can commence. This will result in an undersupply of Grade A office space in 2026.
It is expected that the lack of Grade A vacancy in prime locations and a need to reduce operating costs will cause large occupiers to shift requirements to secondary office locations. In 2026, intense competition for Grade A office space in prime locations could cause rents in secondary locations to increase. This in turn will justify new speculative developments to address supply issues.
Scotland
We have seen significant growth in Scotland’s mixed-use development space with various examples of traditional retail space being repurposed for mixed use. Affordable housing continues to be a key priority for the Scottish Government and several new schemes, including city centre regeneration schemes, have seen housing being incorporated with other uses. Additionally, Data Centres are coming more into vogue but still difficulty in debt to encourage greater growth in this sector.
Radical plans at Centre West in East Kilbride are underway whereby the existing shopping centre will be transformed to a multi-use development, comprising the creation of circa 300 new homes (25% for social housing) together with art and leisure facilities as well as retail space.
Glasgow City Council also granted planning permission in 2025 for a major redevelopment at the former College Street Goods Yard for more than 700 build to rent flats as well as student accommodation. The plans also include commercial space, green areas and pedestrian and cycle connections. While there are first signs of cautious optimism on the basis of inflation steadying and wage inflation easing which may assist the sector, the usual challenges of construction costs increases, and it's a squeeze on individuals disposable income.
Energy efficiency, sustainability and environmental objectives continue to underpin policy. Regulations introducing Minimum Energy Efficiency Standards (MEES) for the private rental sector are expected to come into force for new private rental sector tenancies from 2028 and for all domestic private rented sector tenancies from 2033. New EPC (Sc) Regs 2025 come into force on 31 October 2026 to overhaul the existing system with the intention of greater transparency and to harmonise the approach used across the rest of the UK. A new draft Buildings (Heating and Energy Performance) and Heat Networks (Scotland) Bill has been published which supports the decarbonisation of heat in buildings to move away from fossil fuel heating such as gas boilers.
There has been a dip in property investment which is largely attributed to broader economic and geopolitical factors (including ongoing conflicts in the middle east and trade disputes). That being said, investor appetite for prime retail remains strong. In November 2025, one of Scotland’s busiest shopping centres, Braehead Shopping Centre, was bought by the Fraser Group in a landmark deal reported to be worth £220m. Momentum in the industrial prime sector remains strong; however, ongoing concerns around yield compression are being balanced by sustained rental growth.
Northern Ireland
In 2025, Northern Ireland's commercial property market continued its transformation, driven by evolving occupier demands, persistent cost pressures, and sector-specific resilience. The investment market, however, saw a notable upswing, with investment volume hitting £308.2 million – 8% above the five-year average and more than double the 2024 total, according to LSH.
Retail property remained a prime asset class for investors. Significant transactions included the Herbert Group’s £58.8 million acquisition of Lesley Abbeycentre in Newtownabbey from NewRiver REIT, marking the largest deal of the year. Additionally, local investors secured two of the three shopping centre deals, continuing a recent trend. The retail market flourished due to increased footfall and strong demand from both emerging and expanding brands. The retail warehouse market also showed robust demand, exemplified by the £30 million sale of Riverside Retail Park in Coleraine to Magmel in December 2025.
Industrial assets performed well in 2025, though other sectors faced challenges. The office market struggled with a lack of suitable Grade A space, minimal new developments, and an oversupply of Grade B stock that no longer aligns with modern occupier needs. Conversely, the hotel sector thrived, with ongoing development and investment enhancing Belfast's appeal as a business and leisure destination.
Looking ahead to 2026, the outlook is cautiously optimistic, buoyed by improving economic indicators, stabilising investor sentiment, and anticipated rent and capital value growth in key asset classes.
Northern Ireland outperformed the rest of the UK in economic growth during 2025, largely driven by business services. Projections for 2026 remain strong, supported by easing inflation and improved consumer confidence.
Export performance was robust, particularly to EU markets, thanks to dual-market access, a unique advantage for Northern Ireland businesses. These favourable macro-conditions are expected to bolster the property market sentiment as we move into 2026.
The overall outlook is one of measured optimism, with sectors that adapt to shifting occupier behaviours, ESG standards, and changing economic conditions poised to seize the opportunities that 2026 will offer.
Thank you to Real Estate Director, Louise Conroy, for her contribution to this article.
