The outlook for 2026 points to increasing evidence of a fundamental shift in the UK commercial property landscape. Both occupational and investment markets are being reshaped by forces that require new ways of thinking—driven as much by rapid technological change as by evolving, increasingly generational perspectives. While the Global Financial Crisis introduced the era of “structural change,” the more recent period of Global Financial Tightening has triggered a deeper and less visible paradigm shift in occupier and investor psychology and behaviour. What is visible, however, is the emergence of new occupational formats, investment criteria, and research approaches that have transformed the market almost beyond recognition.

A period of caution among investors and businesses in the first half of 2026 is expected to give way to greater activity in the second half, as the effects of domestic and global economic policy adjustments become clearer. Investment volumes are forecast to match or potentially surpass 2024 levels, reaching a total of £45–£50 billion.

The Bank Rate is expected to fall to 3.75% by the end of 2025, before stabilising between 3.00% and 3.50% by mid-2026. The trajectory of the UK economy will depend on the interplay between continued pressure on household disposable income and a potential uplift from increased government investment.

UK commercial property returns are projected to reach double digits (11%) in 2026, supported by “base effects” and moderate yield compression of around 30 bps, as All Property equivalent yields follow declining gilt yields. At the same time, debt is set to become increasingly accretive for higher-yielding projects toward year-end. Returns are expected to be among the highest in Europe.

Quantifying the Budget’s impact on the economy remains challenging, particularly given its influence on both business and consumer sentiment. The Office for Budget Responsibility’s latest outlook indicates that the UK should perform reasonably well in 2025 and 2026, although GDP growth is expected to rely heavily on government consumption and investment. A key downside risk is consumer spending: many households continue to face significant increases in re-mortgaging costs, alongside limited pay growth as higher employer National Insurance contributions restrict the scope for pay awards in 2026.

Upward revisions to inflation forecasts also imply that interest rates may settle at a higher level than previously anticipated. This ‘higher-for-longer’ environment limits the potential for near-term yield compression, as gilt rates are expected to remain above levels forecast only a few months ago. Higher borrowing costs will further slow the recovery of the investment market.

Nevertheless, capital market activity is expected to strengthen in 2026, supported by broad expectations that the Bank Rate will fall by at least another 100 basis points to 3.75% by year-end. While a return to the buoyancy seen in the mid-2010s is unlikely, transactional activity is expected to at least match 2024 levels, with upside potential in the second half of the year. Overall, investment volumes are projected to fall within the range of £45 to £50 billion.

Development perspectives:
In 2025, “ground-up” Grade A rents are expected to reach £55–£60 psf, representing a 25%–30% uplift on existing stock. Delays in delivering new space will also push up rents for standing stock that can be repurposed within twelve months. A 50% uplift to around £45 psf is achievable compared with prevailing un-repurposed rents of £25–£30 psf. Many assets currently perceived as secondary or tertiary—due to either specification or location—will increasingly be regarded as stranded assets (economically obsolete). Those investors and developers with the commercial foresight to secure alternative uses and maintain supporting debt structures will be best positioned to unlock value. UK institutions are expected to continue disposing of assets at a discount, yet many investors remain cautious about acquiring assets for portfolio enhancement.

Occupier perspectives:
Two distinct types of occupational demand will continue to shape the office market in 2026:
A/ Demand from organisations “right-sizing” and consolidating into higher-quality accommodation; and
B/ Demand from corporates committed to securing ESG-compliant (net-zero) space ahead of key target dates, where rent is not the primary constraint.
The unifying theme is that both groups are seeking vibrant, high-quality environments that help attract and retain talent while supporting return-to-office strategies.

Paradigm shift:
2024 has marked a genuine paradigm shift in occupier and developer mindsets, with a clear step-change in both building design and leasing strategy. For buildings over 100,000 sq ft, design and leasing models increasingly assume 55% let on a conventional basis, 30% to a flex operator, and 15% as “plug-and-play” space catering to both emerging and established businesses. This integrated approach has a significant influence on investor appetite and acquisition yields. Developers and investment committees must now consider a broader and more interconnected stakeholder group, including fund managers, asset managers, lenders, ESG and sustainability advisers, and HR specialists.

Steady Demand.
Take-up for units of 100,000 sq ft and above is forecast to reach around 25 million sq ft, representing a slight year-on-year increase. Demand is expected to strengthen further in 2026, bringing take-up close to—or potentially above—the pre-Covid 10-year average of 27.5 million sq ft. The “flight to prime” will remain a dominant trend, although well-located secondary space is also expected to maintain solid demand.

Reduced Speculative Development.
As borrowing conditions gradually improve, the build-to-suit market is anticipated to regain momentum next year. Supply growth has stabilised, and—with speculative development activity remaining low and demand resilient—availability is set to decline in 2026. Consequently, rental growth is expected to stay robust at 3.5% to 5.5%.

Recovery Delayed.
The improvement in investor sentiment and the yield compression initially expected in Q4 2025 are still anticipated, but now pushed back to mid-2025. This delay reflects a slower pace of interest rate cuts and the continued high cost of debt, which remains non-accretive. Geopolitical uncertainty has also played a role, compounded by questions surrounding the scale, direction, and policy stance of the United States on monetary, fiscal, and foreign affairs.

Market Movements.
Higher-quality core-plus assets—modern, well located, and offering asset-management potential—are already attracting strong interest, particularly from UK funds competing more aggressively. This has produced modest downward pressure on yields, with further compression expected in 2026.

The retail property market in 2026 is expected to match the strengths seen in 2025, although activity will be front-loaded through mid-year as space shortages begin to constrain transactions.

The Struggle to Find Space:
Transactional activity in leasing markets may weaken in the second half of the year as key operators—such as Zara, Uniqlo, JD Sports, and Next—face challenges in finding further expansion space. Collaboration with landlords will become increasingly important in unlocking available units. M&S will continue to open new stores in prime locations, joined by Primark with plans for new openings and extensions across the UK.

Investors are encouraged by recent take-up of large prime spaces in long-term vacant department stores and the amalgamation of vacancies in shopping centres. Similarly, supply of standard shop units in both shopping centres and high streets continues to lag behind retailer demand, creating competitive tension and driving rental growth—trends expected to continue into 2026.

Market Participants: New and Established
The market is seeing activity from new entrants, including online start-ups seeking physical presence, while established brands are also expanding across the top 30 shopping centres, city centres, and university/cathedral towns. Mint Velvet, Oliver Bonas, Hotel Chocolat, and Gail’s have led the charge, alongside overseas retailers such as Rodd & Gunn, Waterstones, and Crew.

Out-of-Town Retail
Out-of-town locations are experiencing steady activity and rental growth, which in 2026 will be curtailed only by a lack of stock. Elevated levels of lettings across retail segments will continue to drive rents higher, with fashion retailers competing alongside discounters and food operators. Chains such as M&S Simply Food, Lidl, Aldi, and Sainsbury’s are actively negotiating rents and freehold acquisitions to support growth in 2026 and beyond.

Health Market Evolution
Following several successful openings and the continued growth of the health sector, 2026 is expected to see more innovative wellness concepts entering the market. The intersection of preventive medicine and wellness will continue to blur—imagine full-body scans combined with aesthetic treatments like Botox in a retail environment—creating unique experiential offerings for consumers.

Pre-Loved Momentum
The pre-loved market is set to expand further and gain market share, covering a wide spectrum of price points. High-street brands like Zara are launching their own pre-loved lines, while platforms such as Hurr are enabling rapid delivery of second-hand dresses in as little as 20 minutes via Deliveroo. This trend is expected to support both pop-up and permanent physical retail presence in 2026.

Luxury Redefined
Luxury retailing is undergoing a paradigm shift, with changing consumer perceptions and expectations contributing to slowing or declining sales for traditional fashion houses globally. Millennials and Generation Z are driving demand for innovation and excitement, compelling brands to make strategic decisions regarding store portfolios, refits, and pop-up activations to recapture market share.

Refurbishment
The trend of refurbishing older “Generation 1” PBSA (Purpose-Built Student Accommodation) buildings is expected to gain momentum in 2026 and will likely extend to early BTR (Build-to-Rent) schemes entering the market. While BTR refurbishments will generally be less invasive, substantial work will still be required to bring them up to the standard of new BTR stock.

M&A & Scaling Up
M&A activity in the PBSA sector was largely absent in 2025, as reflected in investment volumes. However, recent events, such as the liquidation of CA Ventures and Novel Student, signal a potential increase in M&A activity in 2026, as investors seek opportunities to expand market share and scale operations rapidly.

International Student Growth
Despite media reports of declining overseas student numbers, applications for the 2025/26 academic year are expected to return to previous strong levels. The domestic undergraduate fee cap increase of 3.1% for 2025/26 is not expected to materially affect demand. For context, the 2012/13 fee hike of 200% resulted in only a marginal 6.5% drop in student numbers the following year.

Rental Performance
Rental inflation is expected to moderate slightly but remain well above long-term averages across core UK cities in 2026. Supply will remain tight. Recent stamp-duty changes are accelerating the net outflow of smaller-scale residential landlords, and the current scale of new BTR and PBSA supply is insufficient to absorb this reduction. Demand indicators remain strong, supported by a growing population and high barriers for first-time buyers entering the housing market. Wage inflation is forecast to outpace CPI inflation over the next twelve months, giving tenants more disposable income to support rental growth.

Residential Resilience
Despite numerous economic headwinds, including higher-for-longer interest rates, the UK housing market has remained resilient and is on track to achieve annual price growth of around 3% in 2025.

Market Sentiment
The outlook for 2026 will depend heavily on external political developments and their impact on inflation and interest rates. Nevertheless, a continuation of positive sentiment is expected, as consumers gradually adapt to a prolonged higher-rate environment.

House Prices
As a result, house price growth of 3% to 4% is anticipated in 2026. Private rents are also expected to continue rising, driven by limited supply and the withdrawal of some investors from the market due to regulatory pressures, including higher taxation, increased stamp duty on second homes, and reforms to tenant protections.

Housing Starts
Housing starts are projected to rise, supported by increased sales across new-build sites. However, the expansion of the UK’s housing stock remains constrained by planning delays and associated costs. Affordable housing providers will also need to resolve remediation challenges to expand their acquisitions and meet demand.

2026 Construction Trends Overall construction output in 2026 is projected to decline by 2.3% compared with 2023, as high interest rates, rising input costs, political uncertainty, and evolving regulatory pressures contributed to a slow start to the year.

Signs of recovery emerged in the second half of the year, partially offsetting the overall decline. Positive quarterly output growth of 0.8% q/q was recorded in Q3 and has continued into Q4. Much of this uplift was driven by major green energy projects, including a £3.6 billion offshore wind farm approval.

2026 Construction Forecast
Sustainability will continue to be a top priority as the industry works towards net zero, further intensified by the approaching 2030 MEES deadline, which requires all commercially let properties to achieve an EPC rating of B. Colliers is advising many clients on a turnkey basis to ensure compliance with these critical timelines.

Construction Output
Overall construction output is forecast to increase by 2.5% in 2026, contingent in part on the Labour government delivering on its promise to “get Britain building again.” Early implementation of planning reforms to reduce project approval delays would further support this growth.

Tender Inflation and Price Pressures
Construction tender inflation is expected to remain stable at around 3%. With improvements in materials supply chains and stabilisation of material costs, labour shortages are anticipated to be the primary driver of price pressures.

Project Risk Management
Contractor insolvencies remain a key risk to project delivery. Proper risk allocation between employer and contractor will be essential to ensure projects are completed successfully.