Investment Quarterly
Q2 2025

UK commercial property investment in Q2 2025 held broadly in line with Q1 levels, with modest gains across most sectors. Only alternatives saw a decline, continuing a downward trend from the previous quarter.

Source: Carter Jonas, RCA, CoStar

A total of £10bn was traded in Q2 2025, representing a modest 3% decline quarter-on-quarter, 4% down year-on-year and 24% below the five-year quarterly average. The rolling annual total remained broadly in line with the previous quarter and was 14% below the five-year average of £53.3bn.

Source: Carter Jonas, RCA, CoStar

Approximately 41% of all investment occurred in London, above the five-year average of 35% and the 38% share recorded in Q1 2025. Investors primarily targeted offices and retail, while alternatives assets saw a decline. Overseas capital accounted for 63% of the total.

Conversely, investment in the regional markets (UK excluding London) accounted for 49% of the total. The South East region recorded the highest level of investment outside the capital, with circa £740m purchased, followed by the East of England with circa £289m.

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 25%, with retail at 23% and industrial assets at 22%. When compared with their respective five-year quarterly averages, only retail recorded an increase in investment volumes, rising 9% above the average. In contrast, alternatives were 34% below their five-year average, office volumes were down by 14%, and industrial investment saw a decline of 34% relative to the five-year trend.

Source: Carter Jonas, RCA, CoStar

Office

Office investment volumes picked up to £3bn in the second quarter, representing a 20% increase quarter-on-quarter, but 14% 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 six 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%.

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 increased by 9% quarter-on-quarter in Q2 2025 to around £2.2bn, but volumes were 34% 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 £2.3bn in Q2 2025, up 16% on the previous quarter and 9% 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 across the alternative sectors declined for a second consecutive quarter in Q2 2025, with £2.5bn transacted, down 35% quarter-on-quarter, 54% year-on-year, and 34% below the five-year average. Several student accommodation, senior housing and hotel deals completed during the quarter, but volumes were dragged down by a quieter BTR market amid development delays and limited stock. Nonetheless, investor sentiment towards living sectors remains positive, underpinned by income resilience and long-term demographic demand. Notable deals included Omega Healthcare’s £241m care home portfolio, Barings and Rosethorn Capital’s £101.1m PBSA scheme in London, and Schroders Capital’s £100m purchase of the W Hotel in Edinburgh.

Overseas Investment

Source: Carter Jonas, RCA, CoStar

• Overseas investment in UK commercial property totalled £4.3bn in Q2 2025, down 25% quarter-on-quarter and 31% below the five-year quarterly average. It accounted for 43% of total investment, below the 10-year average of 47%.

• 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 purchases of around £800m. 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.