Investment Quarterly
Q2 2025
Investment in UK commercial property remained subdued in Q2 2025, with offices and retail the only major sectors to see an uptick, while alternatives and industrial assets recorded notable quarter-on-quarter declines.
Source: Carter Jonas, RCA, CoStar
A total of £8.9bn was traded in Q2 2025, representing a 14% decline quarter-on-quarter, 16% down year-on-year and 33% below the five-year quarterly average. The rolling annual total remained broadly in line with the previous quarter and was 16% below the five-year average of £53.3bn.
Source: Carter Jonas, RCA, CoStar
Approximately 35% of all investment occurred in London, on par with the five-year average, but below the 38% share recorded in Q1 2025. Investors primarily targeted offices and retail, while the recent favourite, build-to-rent (BTR) assets, saw a notable decline. Overseas capital accounted for 61% of the total.
Conversely, investment in the regional markets (UK excluding London) accounted for 65% of the total. The South East region recorded the highest level of investment outside the capital, with circa £670m purchased, followed by the East of England with circa £277m.
Source: Carter Jonas, RCA, CoStar
In Q2 2025, offices accounted for the largest share of UK investment activity at 30%, overtaking alternatives for the first time since Q3 2023. Alternatives followed at 28%, with retail at 24% and industrial assets at 18%. When compared with their respective five-year quarterly averages, only retail recorded an increase in investment volumes, rising 3% above the average. In contrast, alternatives were 33% below their five-year average, office volumes declined by 25%, and industrial investment saw the steepest fall, down 54% relative to the five-year trend.
Source: Carter Jonas, RCA, CoStar
Office
Office investment volumes picked up gently to £2.7bn in the second quarter, representing a 5% increase quarter-on-quarter, but 25% below the five-year quarterly average. This reflects continued subdued activity in the market for large office assets. No transactions exceeded £500m during the quarter, with five deals surpassing £100m and only one above £300m. Investors continued to target high-quality offices and assets with potential for refurbishment or redevelopment.
Most of the quarter's largest deals were in London. The US-based bank State Street acquired 100 New Bridge Street for £333m, reflecting a net initial yield of 5%, while a joint venture between Australia's Aware Super and Delancey purchased 11–12 Hanover Square for £160m, at a net initial yield of 3.86%.
Several office assets were acquired with the intention of being redeveloped into hotels or residential schemes. For example, Whitbread acquired Dorset House for £47.5m with plans to convert it into a 400-room Hub by Premier Inn, while London Square bought Wimbledon Bridge House for £28m, with plans to redevelop it into residential units.
Despite weaker overall investment outside London, there were some notable transactions in the regions. The Spanish-based Pontegadea acquired Capital Square in Edinburgh for circa £75m, while Melford Capital purchased 101 Embankment in Manchester for £75m.
Industrial
Industrial investment fell by 25% quarter-on-quarter in Q2 2025 to around £1.5bn, with volumes also 54% below the five-year quarterly average. One of the largest deals was Barings’ acquisition of a portfolio of four multi-let urban logistics properties across the South East of England for £145.2m. Another notable transaction was Carion Partners’ purchase of the 954,000 sq ft Frontier Park in Blackburn for approximately £115m.
Retail
Retail investment totalled just under £2.2bn in Q2 2025, up 5% on the previous quarter and 3% above the five-year quarterly average. Several sizeable transactions involving prime retail assets, retail parks, and supermarkets supported volumes during the quarter. Hammerson completed the £186 million acquisition of a controlling interest in Brent Cross, raising its economic stake to 97%. GTAM Apex Lakeside Bidco purchased Lakeside Retail Park in Thurrock, Essex for £114m, reflecting a gross yield of around 6%, while MDSR Investments acquired the 1.12m sq ft Festival Place shopping centre in Basingstoke out of receivership for £99.1m.
Alternatives
Spending on the alternative sectors declined notably for a second consecutive quarter in Q2 2025. With £2.5bn transacted, volumes were down 34% quarter-on-quarter, 53% year-on-year, and were 33% below the five-year quarterly average. Several student accommodation, senior housing and hotel deals completed during the quarter. For example, Omega Healthcare acquired a portfolio of 46 care homes for £241m; Barings, in a joint venture with Rosethorn Capital, purchased a purpose-built student accommodation (PBSA) scheme in London for £101.1m, while Schroders Capital acquired the W Hotel in Edinburgh for £100m.
Overseas Investment
Source: Carter Jonas, RCA, CoStar
Overseas investment in UK commercial property totalled £4.1bn in Q2 2025, down 29% quarter-on-quarter and 34% below the five-year quarterly average. It accounted for 46% of total investment, below the 10-year average of 53%.
US investors retained the largest share of overseas investment in Q2 2025, totalling around £2.1bn, though down from £2.9bn in the previous quarter. Notable deals included State Street’s acquisition of 100 New Bridge Street in London for £333m, reflecting a 5% net initial yield, and Omega Healthcare’s £241m purchase of 46 care homes.
European investors had another strong quarter, ranking second with around £1.1bn invested in UK commercial property. For example, the Spanish Pontegadea acquired Capital Square in Edinburgh for £75m, while a joint venture between French investors Euragone Asset Management and Mata Capital acquired the Corner Hotel in London for £42m.
The outlook from Ali Rana, Head of National Investment
As the summer holiday period begins, market activity is naturally slowing. However, there is a growing sense of cautious optimism across the UK commercial property sector.
Recent transactional evidence suggests that capital values are not only stabilising but beginning to recover, signalling renewed confidence among investors. While many sales are being deferred until September, this trend reflects a strategic pause rather than a lack of appetite, as market participants await further clarity on economic conditions.
Expectations of further interest rate cuts later this year are contributing to the positive sentiment, with the prospect of improved affordability and stronger investor confidence. This optimism is supported by a resilient occupational market, where tenant demand remains steady across most sectors, new supply is limited, and structural demand trends—particularly in logistics, life sciences, and build-to-rent—continue to attract capital.
Despite these encouraging signs, several risks remain on the horizon. These include the potential for slower-than-expected rate cuts, ongoing macroeconomic uncertainty, and rising occupier costs driven by fiscal changes such as increases in business rates and employer contributions.
In addition, legislative reforms—most notably the Renters Reform Bill and the potential abolition of upward-only rent reviews—are introducing a degree of uncertainty for investors. Overall, while caution remains warranted, current indicators suggest the UK commercial property market is entering a phase of gradual recovery, underpinned by solid fundamentals and a measured return of investor confidence.
