Overseas investment into UK commercial property slowed sharply in the first quarter of 2026, as global investors grew more cautious amid economic and geopolitical uncertainty, a weaker US dollar and ongoing concerns around development viability.
The latest report from Real Estate:UK, the body representing the £950 billion UK commercial property sector, in collaboration with CoStar Group, shows total UK investment reached £9.7 billion in Q1 2026, almost 40% below the five-year first-quarter average.
The ‘Who invests in UK property 2025/6?’ report can be read here.
Overseas capital accounted for £3.6 billion of activity, with inflows from the US moderating significantly following a record 2025. The slowdown suggests currency movements may already be affecting the relative appeal of UK assets, alongside elevated financing costs and broader global uncertainty.
Despite the weaker quarter, offices emerged as a relative bright spot. The sector attracted £2.9 billion of investment, representing around 30% of total volumes, with activity concentrated in London and a limited number of major regional cities.
By contrast, industrial recorded its weakest quarterly performance in nearly six years, while retail investment remained subdued.
The softer start to 2026 follows a strong 2025, when overseas inflows rose 33% year-on-year to £27.2 billion, the fourth strongest year on record, accounting for a record 56% share of total UK commercial property investment.
The US remained the dominant source of overseas capital, with investors deploying £18.2 billion during 2025. Activity was boosted by large-scale healthcare transactions, including Welltower’s multi-billion-pound acquisitions of care home portfolios from Barchester Healthcare and HC-One.
Even excluding these transactions, US capital continued to underpin overseas investment, supported by then-favourable currency conditions and demand for stable, long-term income.
European investment also strengthened during 2025. French investors deployed more than £1 billion, led by SCPI funds targeting diversified regional assets, while Norwegian and Swedish capital focused on large-scale strategic transactions across sectors including mixed-use, hotels and logistics. Japanese investors also became more active towards the end of the year, particularly in London and the South East.
By sector, healthcare stood out last year, reflecting strong investor conviction in operational real estate supported by long-term demographic trends. Build-to-rent investment reached a record £5.6 billion, while office investment recovered modestly as sentiment improved towards prime assets. Multi-region portfolio transactions also increased, pointing to a growing preference for scale and defensive income.
The report highlights continued demand for operational sectors such as healthcare, build-to-rent, data centres and life sciences, where long-term structural drivers continue to support investment activity.
Melanie Leech, interim chief executive, 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, CoStar Group, said: “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.”