Total UK commercial property investment reached £9.7bn in Q1, almost 40% below the five-year average for the quarter.

Overseas capital announced for £3.6bn, with inflows from the US slowing significantly following a record year in 2025.

The slowdown suggests that the weaker dollar may already be affecting the relative attractiveness of UK assets for overseas buyers, with elevated financing costs and wider global uncertainty also contributing to a more cautious investment environment.

Offices emerged as a relative bright spot in a generally weaker quarter. The 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.

By contrast, industrial investment recorded its weakest quarterly performance in nearly six years, and retail activity remained subdued.

The subdued first quarter follows a strong 2025, which saw foreign inflows rise 33% year-on-year to £27.2bn, the fourth strongest year on record, and accounting for a record 56% share of all UK commercial property investment activity.

As in previous years, the US remained by far the largest overseas investor in UK property. American investors deployed £18.2bn during 2025, driven partly by major healthcare acquisitions, including Welltower’s multi-billion-pound purchases of care home portfolios from Barchester Healthcare and HC-One.

Even excluding those landmark transactions, the report finds that US capital continued to dominate overseas investment into UK real estate, supported by favourable currency conditions and demand for stable, long-term income-producing assets.

European capital also became more active during 2025, with French investors deploying more than £1bn into UK real estate, driven largely by SCPI funds targeting diversified regional assets. Norwegian and Swedish investors focused on large-scale strategic transactions, including mixed-use London estates, hotels and logistics while Japanese investors were also increasingly active towards the end of the period, particularly in London and the South East.

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 In terms of asset classes, healthcare was the standout sector in 2025, reflecting strong investor conviction in operational real estate underpinned by long-term demographic demand. Build-to-let investment also reached a record £5.6bn as overseas investors continued to target professionally managed rental housing, while office investment recovered modestly amid improving sentiment towards prime assets in London and key regional cities.

At the same time, multi-region portfolio transactions rose sharply, highlighting growing investor preference for scale and defensive income streams across sectors including healthcare, logistics and living.

 The report highlights continued investor demand for operational real estate sectors such as healthcare, build-to-rent housing, data centres and life sciences, where long-term structural demand continues to support investment activity.

 ``The strong performance in 2025 demonstrated continued confidence in UK real estate, particularly in sectors such as healthcare, rental housing and operational assets,’’ said Melanie Leech, interim chief executive at Real Estate:UK.

“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.”

 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.”