UK Real Estate Market Outlook Midyear Review 2026

Welcome to CBRE’s UK Real Estate Market Outlook Midyear Review 2026.

Despite ever-present global headwinds, our January outlook showed optimism for UK real estate markets in 2026, predicting market growth, albeit at a slower pace than in 2025. Our view was driven by improving macroeconomic sentiment and positive signs for market activity at the end of last year. As such, 2026 began with cautious optimism.

At the half year mark, the outlook has already seen unexpected changes – both globally and locally. Downside risks have crystallised in light of geopolitical conflict, and we have seen a change in Prime Minister.

This emerging instability has materially shifted the outlook from an economic perspective and begun to infiltrate capital markets in the first half of the year. But there remain areas of growth and opportunity. The environment for lending remains liquid and both prime buildings and core locations continue to see outperformance. For some sectors, the buyer pool is broadening, including for infrastructure-adjacent real estate, which is gaining in its appeal.

Although sentiment has weakened, occupational markets have appeared largely resilient thus far, and our expectations for occupier activity remain principally in line with where they were at the beginning of the year. There is clear evidence emerging which positions strategic and innovative sectors, like artificial intelligence (AI) and defence, as powerful future demand drivers across the breadth of the UK market.

• The outlook for the UK Economy has shifted since the start of the year due to geopolitical instability. Our current forecasts expect inflation to peak at c.3.5% year-on-year in Q4, with Bank rate stable this year and unemployment remaining elevated.
• Capital Markets have seen momentum soften resulting from market volatility, translating to lower aggregate volumes in H1. Differentiated capital performance across sectors, and across prime and secondary assets and locations within sectors, remains a feature of the market.
• We expect relative consistency for Office take-up year-on-year, with the annual demand likely to be in line with 2025. Stronger leasing particularly in London is likely to be driven by the TMT sector and AI firms. The pipeline will remain constrained as construction starts are limited and prime rents in key cities will continue to grow.
• Logistics occupier demand has remained resilient, with many seeking upgraded units that deliver improved efficiencies. Vacancy rates are expected to fall slightly as development viability becomes increasingly difficult, although supply trends vary by region.
• Data Centres will continue to see record demand levels and ongoing supply constraints throughout the rest of 2026, as leasing capacity for AI workloads is rising up the agenda. Occupiers will pay a premium for desirable locations or speed to market, and London continues to dominate. But attention towards campuses and secondary markets is rising with power constraints.
• Retail subsectors continue to behave somewhat independently, with retail parks expected to remain in favour. Sales volumes have thus far remained robust, despite weakened confidence, and experiential retail remains a priority.
• The Living sector continues to face viability issues around new supply, but there has been significant regulatory change in the first half of this year. Meanwhile, we expect rental demand to increase in H2.
• Structural evolution continues for Operational Real Estate; from the broadening of the investor pool, to the consolidation of fragmented market segments. Economic uncertainty and operational costs threaten profitability, but high-quality stock in prime locations remains competitive.
• Developing demand for hybrid, lab-enabled space driven by growth sectors such as AI and defence tech has broadened the occupier pool within Science & Innovation real estate assets. This is expected to sustain momentum into H2 2026, with the Golden Triangle (London, Oxford, Cambridge) at the core of the activity.