Overseas investment into UK commercial property slowed sharply in Q1 2026 as global investors became more cautious amid economic and geopolitical uncertainty, according to new data from Real Estate:UK and CoStar Group.
Total UK commercial property investment in the quarter reached £9.7bn, almost 40% below the five-year first quarter average. Overseas capital accounted for £3.6bn of investment in Q1 with inflows from the US easing significantly following a record year in 2025.
The office sector attracted £2.9bn of investment in Q1 2026, accounting for 30% of total volumes, with activity concentrated in London and a small number of major regional cities. The industrial sector recorded its weakest quarterly performance in nearly six years and retail activity remained subdued.
In 2025, foreign inflows rose 33% year-on-year to £27.2bn, the fourth strongest year on record. American investors deployed £18.2bn last year with French investors deploying more than £1bn into UK real estate, driven largely by SCPI funds targeting diversified regional assets. Japanese investors were also increasingly active towards the end of the period, particularly in London and the South East.
Melanie Leech, interim chief executive of Real Estate:UK, said: “The UK continues to attract substantial international capital into real estate, reflecting the sector’s long-term strengths and the country’s reputation as a stable and transparent place to invest. The strong performance in 2025 demonstrated continued confidence in UK real estate, particularly in sectors such as healthcare, rental housing and operational assets. However, the significantly weaker start to 2026 highlights how sensitive international capital flows are to changes in the wider economic and geopolitical environment.
“Sterling’s appreciation against the dollar may also be eroding some of the pricing advantage that helped drive exceptionally strong US investment into UK real estate during 2025. At the same time, investors continue to raise concerns about the challenges of deploying capital into new development and upgrading existing assets in the UK. Elevated construction costs, regulatory delays and policy uncertainty are all affecting development viability and investor confidence at a time when attracting long-term capital into housing, infrastructure and commercial real estate is critical to supporting economic growth.”
Grant Lonsdale, senior director of market analytics at CoStar Group, added: “CoStar’s data highlights the sharp contrast between a strong 2025 and a much quieter opening quarter in 2026. While uncertainty has clearly weighed on activity in early 2026, investor appetite for UK real estate has not disappeared. We are beginning to see signs of a rotation back towards prime office assets, particularly in Central London and major regional cities, where constrained supply of high quality Grade A space is supporting occupier demand and investor interest. More broadly, the quarter reinforced an ongoing flight to quality across real estate markets, with capital remaining focused on the best-performing sectors and assets.”