UK Real Estate Market Outlook 2026

Welcome to CBRE’s UK Real Estate Market Outlook 2026.

The UK is embarking on 2026 with cautious optimism. From a macroeconomic perspective, several metrics are set to improve, and activity in late 2025, including the UK Autumn Budget announcement, has brought greater certainty to begin the new year. That said, we expect marginally slower growth in 2026 relative to 2025. Despite global headwinds, we anticipate the recent positive signs for market activity to develop further this year.

Real estate capital markets will see a sustained increase in transaction activity and gradual recovery in asset performance driven by rising rental values. Increased activity from domestic core capital and cross-border capital inflows are set to continue, and deployment into real estate by defined contribution pension providers will increase, supported by government initiatives. Falling interest rates and greater competition between lenders mean that the cost of debt will continue to reduce.

The occupational outlook is distinctly sector-dependent, but most asset types will see a boost as improving macroeconomic conditions support business productivity and the progression of government initiatives. In particular, this will support progress in the living sector, strengthen activity in healthcare, and underpin another strong year for data centre development. In the more traditional sectors, supply dynamics will continue to shape the 2026 outlook with demand firmly focused on high-quality, well-located spaces.

Join Tasos Vezyridis and leading CBRE experts Rob Madden, Jason Hardman, and Tariq Hayat, as they unpack the key trends and opportunities shaping real estate and influencing investment and occupier activity in 2026 through a dynamic, unscripted roundtable discussion.

• The UK Economy is likely to see marginally softer growth in 2026. Consumer sentiment has strengthened and inflation will continue to fall, however income growth will slow and fiscal policies will tighten as a result of the 2025 Autumn Budget. There are downside risks to the outlook originating from global uncertainty. We expect a continued boost to UK real estate Capital Markets as the positive momentum established in late 2025 continues this year. We anticipate a reduction in the cost of debt driven by falling interest rates and rising competition to deploy capital into UK real estate.
• Macroeconomic expectations will support the Living sector and boost investment into Build-to-Rent and Purpose-Built Student Accommodation (PBSA) assets. Yields are expected to be stable in 2026 but subject to transaction activity, there is the potential for yield compression towards the end of the year. This, alongside rental growth, will contribute to capital value growth.
• Office market supply for high-quality, well-located stock remains tight and, as a result, we expect the number of occupiers choosing to renew or regear to remain above average. This trend will also promote growth in prime rents among the best spaces and push more demand outside of core locations in 2026. Prospects for Life Sciences are set to improve, with venture capital investment outperforming historical averages in 2025, and an expected boost from the Autumn Budget measures to support the scaling of companies and broadening of capital flows into the sector.
• A softer development pipeline will drive occupational market dynamics for Logistics. Following a strong year for completions in 2025, vacancy is expected to reduce as net absorption will align more closely to net completions this year. Tenants will continue to favour high-quality pipeline space in 2026, further reducing the available pipeline of build-to-suit space. Retail markets will remain polarised; with a shortage of supply in sought after locations, but continued challenges for locations outside of the top tier. Many multi-site retailers will continue to optimise their portfolios.
• New sources of capital are targeting Operational Real Estate (OPRE), with initial activity having been focused within the healthcare sector. We expect hotels, hospitality, and infrastructure-like sectors to see an uptick in activity in 2026. The surge of AI will continue to support Data Centre development and 2026 is likely to be the second strongest year for supply creation; following the record achieved in 2025. Take-up is forecast to exceed new supply for the fifth year in succession.