Chapter 8
Operational Real Estate
UK Real Estate Market Outlook 2026
5 Minute Read
5 Minute Read
Healthcare activity shapes OPRE 2026 outlook
Investment activity in the UK healthcare sector saw a significant uptick in 2025, with transaction volumes reaching £11.2bn, largely driven by a landmark £5.2bn deal in Q4 with the acquisition of Barchester by a US REIT.
US REITs have returned to the market in recent years, seeking greater operational risk and leveraging RIDEA structures, a framework introduced in US legislation which allows REITs to participate in the operating income of healthcare real estate rather than being limited to fixed rental income under triple-net leases. We expect that this trend will continue in 2026 with the influx of capital having notably strengthened market sentiment.
Healthcare activity will remain concentrated within the elderly care sector, with strong competition from an expanding pool of investors who are exceeding the number of sellers. We anticipate significant corporate activity in the sector, and as the operator market remains highly fragmented, consolidation is likely to accelerate.
New sources of capital entering OPRE have identified healthcare as the initial platform for expansion, but we expect hotels, hospitality, and infrastructure-like sectors to also benefit in 2026 from new waves of infrastructure, insurance, and overseas capital, as well as new sources of debt.
Private-pay elderly care operators have been able to protect margins from rising operational costs by increasing fees. In 2026, operators face the challenge of managing ongoing cost pressures without risking further fee increases slowing occupancy growth.
High construction costs and a challenging planning environment are likely to continue to restrict the new development pipeline, creating opportunities to deploy capital towards refurbishing and upgrading existing properties.
The NHS’s 10 Year Plan reinforced the ongoing policy shift towards greater public-private integration and outpatient care. The Government recently committed to establishing 250 new neighbourhood health centres. Currently, the independent sector delivers 10% of elective NHS care but there is set to be an increase in the utilisation of private sector capacity for elective care, diagnostics, and rehabilitation.
In this environment, primary care facilities and private hospitals will play a greater role in the UK’s care delivery, which we believe will generate investment prospects. Local government pension funds are seeking to deploy further capital into primary care, while recapitalisation activity within these sectors has risen and is expected to continue in 2026.
Figure 9: Healthcare investment volumes by buyer type
Trends to watch
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Infrastructure
The convergence between real estate and infrastructure is gaining momentum. Infrastructure investors are moving away from a defined asset class and focusing on assets which have certain characteristics: high barriers to entry, income durability, index linkage, and high replacement costs. For example, UK and European marina markets, offering strong infrastructure credentials, have become a highly sought after growth area for institutional and infrastructure capital.
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Hotels
In the hotels sector, we anticipate strong demand from international visitors, supported by year-on-year increases, alongside stable domestic overnight stays, which will underpin stability in RevPAR growth. This year, we expect a number of large portfolios to transact in UK regional markets. We also foresee several single asset transactions in the mid-cap regional markets as portfolio owners seek to consolidate their recent large-scale acquisitions by disposing of residual assets.
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Urban leisure
In urban leisure, operators remain challenged by rising costs. However, cinemas are expected to sustain their recovery and return to profitability, which has reignited interest in the wider leisure park sector. While double-digit yields persist, renewed confidence is evident through ongoing discussions around M&A in the sector.
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Pubs
Pub operators are beginning to restructure their portfolios as they reassess operating models in response to rising costs and shifting consumer trends. We anticipate steady growth in trade from community wet-led pubs and for city centre locations to benefit as return to office continues to rise. Conversely, reduced sales volumes in mid-market food-led pubs is likely to result in the revaluation of some models.
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Self storage
Self storage revenues are expected to continue trending positively, supported by ongoing market undersupply. However, many UK stores will be impacted by business rate increases from April 2026 which will exert pressure on margins. The 2026 investment outlook is promising, with significant platform level M&A opportunities emerging and growing institutional interest in joint ventures and third-party management contract structures.