Commercial property trends for 2026
With the new year underway, what does 2026 have in store for the commercial property market? Property experts at Savills have shared their outlook for the year ahead.
There was considerable uncertainty in the months leading up to the Chancellor’s Budget in November 2025. Now that the announcement has passed, the market is expected to stabilise as investors and businesses move forward with greater confidence in their decision-making. Despite this, Mat Oakley, Director of Commercial Research at Savills, notes that “the environment for economic growth remains sluggish.” However, this is not anticipated to have the typical dampening effect on occupational activity, largely due to constrained supply and limited construction activity.
Overall, offices are expected to be the most sought-after asset class among investors in 2026. Tenants are becoming increasingly selective about location and quality, while rapid growth in the AI sector is likely to intensify competition for data centre sites throughout the year.
Retail sector review
According to a report from Knight Frank, the retail sector performed strongly in 2025 despite weak macro-economic conditions.
Retail emerged as the best-performing property asset class last year, delivering a total return of 9.6%, significantly higher than the overall property average of 6.6%. Shopping centres and food stores achieved the strongest returns (both 10.2%), followed closely by retail warehousing at 9.8%.
Stephen Springham, Head of UK Markets at Knight Frank, commented that “retail occupier markets are arguably in their best state for over a decade.” However, this strength has yet to be fully reflected in investment volumes. Total retail investment for 2025 is estimated at £5.83bn, representing a 17% decline year-on-year and 8% below the ten-year average. Volumes are expected to improve in 2026, supported by several major shopping centre transactions agreed towards the end of last year.
UK hotel investment dips
Savills data indicates that UK hotel investment declined in 2025.
Total investment volumes reached approximately £5bn, down 15% compared to 2024, but broadly in line with the ten-year average of £4.7bn. Activity strengthened towards the end of the year, with Q4 hotel investment exceeding £2bn—40% higher than the same period in 2024.
Portfolio transactions fell sharply from £3.1bn in 2024 to £750m in 2025. Despite this, David Kellett, Head of Hotel Capital Markets at Savills, commented:
“UK hotel transactions proved resilient in 2025, driven by a liquid single-asset market and the enduring appeal of London, which recorded its strongest year for investment volumes since 2018. Despite ongoing cost pressures for hospitality operators, we anticipate a strong year ahead in 2026, with increased portfolio activity building on the momentum seen in Q4.”
Scottish market update
The Scottish commercial property market demonstrated resilience in 2025 despite wider economic uncertainty.
Knight Frank analysis of Real Capital Analytics data shows that total investment volumes reached £1.96bn by year-end, closely aligned with the five-year average of £1.97bn. Alasdair Steele, Head of Scotland Commercial Property at Knight Frank, commented:
“While we narrowly missed the £2bn mark, several transactions that were close to completion will now fall into 2026 following a surge in activity during November and December.”
Retail was the strongest-performing sector, accounting for £717m of investment, followed by offices at £461m. Notable office transactions included Quartermile One in Edinburgh and The Sentinel in Glasgow.
Hotel investment slowed in the second half of the year, reaching £322m by the end of 2025. Industrial investment totalled £367m, marking the sector’s second-lowest annual figure since 2020.
All details are correct at the time of writing (21 January 2026).
Read the full review here
Important information
The value of investments can go down as well as up, and you may not get back the full amount invested. Past performance is not a reliable indicator of future results.
This document is for information purposes only and does not constitute personalised financial advice. While the information is based on our current understanding, it may be subject to change and its accuracy or completeness cannot be guaranteed. We accept no liability for any errors or omissions. No part of this document may be reproduced without prior permission.