Office and retail weaken year on year, while industrial sector remains resilient
Demand for leasing and investment weakened across three of the four main commercial property sectors in the first quarter of 2026, as markets weighed the risk of interest rate rises following the outbreak of war in Iran.
Rightmove’s Commercial Insights Tracker for Q1 2026 showed the office market recorded a 3% annual fall in leasing demand and a 9% drop in investment demand. Retail saw leasing demand down 9% and investment demand down 2%. Leisure posted the sharpest declines, with leasing demand falling 11% and investment demand down 14%.
Industrial and logistics was the only category to grow, with leasing demand rising 6% and investment demand up 13%, reinforcing its position as the strongest area of recent years.
“In terms of leasing for sheds across the UK over 100,000 square feet (big box), Q1 2026 take-up totalled 7.6 million square feet, which is 11% higher than the same quarter last year,” said Lewis Rapley, Logistics Research Associate, Commercial Research, at Savills. “It was also 16% higher than Q4 2025, which showed momentum continued into the new year.
“While the full impact of the war in Iran is still too early to tell, it is encouraging to see demand and viewings/enquiries remain robust.”
Vincent Scammell, director of sales and operations at BizSpace, said demand for industrial premises was continuing despite wider uncertainty. “Despite a more uncertain geopolitical backdrop weighing on some sectors, demand for industrial space continues to grow,” he said. “This reflects a longer-term shift, with SMEs prioritising operational resilience, supply chain flexibility and access to well-located space over long-term fixed commitments.
“We are also seeing rising demand from defence-adjacent sectors, particularly across heavy manufacturing, technology and R&D supply chains, supported by increased government defence spending across Europe. With urgency high, existing stock remains the only scalable solution.”
Rightmove said the annual comparisons for offices, retail and leisure should be read alongside stronger conditions in 2025, meaning Q1’s declines were measured against a higher base. Across the market as a whole, demand to invest was 5% lower than a year earlier, but still 10% above the level recorded two years ago.
Offices were down 9% for investment demand year on year, following what Rightmove described as an unusually strong jump in the same period of 2025. Even after the fall, investment demand for offices remained 53% higher than two years earlier. Leisure and hospitality were also set against stronger recent conditions, while still above their position two years ago.
“The uncertainty from the fallout of the war with Iran may have given both businesses and investors a reason to pause for thought,” said Andy Miles (pictured right), managing director of commercial at Rightmove.
“At a time when many analysts are predicting two or even three increases to the Bank of England’s base rate this year, decision making becomes difficult.”
For mortgage and commercial finance advisers, the figures point to uneven credit conditions by asset type. Industrial and logistics demand may continue to support transaction volumes and refinancing activity, while offices, retail and leisure could face longer decision cycles, tougher pricing discussions and greater scrutiny of income resilience where rate expectations remain volatile.
“Activity across our specialist operational real estate sectors was resilient in the first quarter of this year, supported by continued demand for businesses with strong fundamentals and sustainable underlying income,” said Darren Bond, global managing director at Christie & Co.
“While decision-making is being shaped by interest rate expectations and cost pressures, well-priced opportunities continue to be attractive, particularly where businesses are well run and performance is clearly evidenced. As we move further through the year, realism on pricing and clarity around business sustainability will remain key to maintaining momentum across these markets.”
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