Operational Real Estate (OPRE)

January 2026 Forecast

Significant corporate activity targeting healthcare

Over the course of the year, we anticipate significant corporate activity in the sector, supported by increasingly favourable pricing and liquidity conditions. As the sector remains highly fragmented, consolidation is likely to accelerate.

Midyear review

• Investment activity across healthcare was down in H1 2026, but this was largely due to regulatory reviews into US REIT investment from an anti-trust perspective. The volume of transactions in exclusivity remains above the long-term average. H2 will see significant transaction volumes, as evidenced by the Blue Owl purchase of the EPF hospital portfolio at >£1bn.
• Across the care homes sector, consolidation is accelerating across both occupiers and investors, driven by demographic tailwinds, supply constraints, policy pressure, and renewed capital availability. However, despite recent large deals, the UK care sector is still structurally fragmented.

January 2026 Forecast

Operational performance driving hotel investment activity

Single-asset transactions continue to lead activity, with rising insolvencies and portfolio rationalisation creating value-add opportunities for opportunistic buyers. Easing interest rates and challenger bank financing offer cautious optimism for the year ahead.

Midyear review

• UK hotel trading remains resilient, supported by strong demand, limited new supply, and robust performance in London and major regional cities. While the number of portfolio transactions were subdued, H1 investment volumes surpassed expectations and reached £1.7bn in London, demonstrating its enduring appeal to global capital.
• Demand for key regional cities such as Edinburgh and Manchester remains strong with improved liquidity and increasingly competitive debt available. High-quality assets within London and prime regional markets remain competitive, as the hotel sector remains a secure and inflation-hedged investment.
• The H2 outlook is positive, driven by occupancy and ADR growth, though profitability faces pressure from rising wages, business rates, and economic uncertainty.

January 2026 Forecast

Strong performance across self storage

The UK self storage market continues to gather positive momentum with multiple large scale platform transactions anticipated over the next 12 months. As customer awareness of the service offering increases, demand is expected to rise even more.

Midyear review

• The self storage sector remains a compelling operational real estate sector for institutional investors. Despite higher debt costs, self storage saw a strong first half of 2026, with over £320m invested.
• Across the leisure sector,  high operating costs continue to weigh on pub margins and, where operators are unable to offset them, are placing pressure on profitability and covenant strength.
• The recent sale of Peach Pubs via a pre-pack administration for just over £300,000 per leasehold pub (having been bought for nearly £800,000 per pub) illustrates the current pressures for the sector.

H2 2026 Outlook

New sources of capital to target operational real estate in H2

Infrastructure investors, insurance capital, and overseas REITs are actively targeting OPRE. After a record-breaking year for healthcare in 2025, investors are now expanding to other subsectors such as hotels, self storage, and marinas. Operational assets with high barriers to entry, index-linked income, and high replacement costs are increasingly meeting infrastructure investors' criteria. This is drawing a new and deep pool of capital that previously sat outside of traditional real estate.

Demand for leisure net lease transactions remains steady, though deal flow continues to be constrained by limited available stock. The majority of supply coming to market reflects institutional disposals rather than any broad shift in sentiment toward the sector. Institutional funds are starting to take advantage of historically soft yields. These investors are looking at sectors such as leisure parks and cinemas which have been overlooked in recent years. We anticipate more stock to start emerging in H2 2026 and 2027, driven by this latent demand.

Continued elevated operating costs across energy, labour, F&B, and business rates are weighing heavily on pub operators' margins. The recent announcement of a 20% cut to business rates for pubs, social clubs, and live music venues in England has been welcomed by pub operators and trade bodies as a positive first step. Lenders and landlords are applying greater scrutiny to operator financials at rent review and lease renewal.

UK hotel investment exceeded £2.9bn in H1 2026, up 119% on H1 2025. London continues to dominate; acting as preferred destination for international and institutional capital, with bid-ask spreads narrowing. Regional markets such as Manchester are also seeing improving liquidity, with several large portfolio transactions anticipated throughout the year as owners consolidate recent acquisitions and dispose of residual assets. Going into H2, domestic investors will continue to dominate, but overseas capital, particularly from the US and Middle East, will remain active for prime assets. Competition among lenders is increasing, making financing more accessible for well-structured deals.

Figure 13: Operational real estate investment volumes