Signs of a turning point emerge in muted UK commercial property market

The UK commercial property market remained subdued at the end of 2025, but findings of the latest RICS UK Commercial Property Monitor for the fourth quarter of last year suggest conditions may be starting to steady.

Although higher borrowing costs and a weak economic backdrop are still weighing on activity, respondents of the RICS survey reported a modest improvement in sentiment across both occupier and investment markets. Around 32% of contributors now judge that the sector is in the early phase of an upturn, up from 27% three months earlier.

On the occupier side, the RICS Occupier Sentiment Index moved to -10 in Q4 from -12 in Q3, indicating that the pace of deterioration has slowed rather than reversed. Overall tenant demand continued to fall, with retail showing the sharpest decline. Conditions in the office and industrial segments were still negative but slightly less so than in the previous quarter.

Vacancy trends remained upward across the main commercial sectors, though the rate at which space is coming back to the market has eased. In response, landlords are continuing to offer larger incentives to secure tenants, underlining competitive leasing conditions. Even so, expectations for prime rents have firmed: respondents anticipate prime office rents will rise by 2.5% over the next 12 months, with prime industrial rents seen increasing by 2.1%. Secondary assets are expected to remain under pressure.

Investment sentiment, while still weak, also improved marginally. The Investment Sentiment Index came in at -9, a slight uplift on Q3, but still consistent with subdued investor appetite. Enquiries for offices, retail and industrial property remain limited, suggesting investors are cautious about committing new capital.

Lending conditions showed one of the clearer shifts in the quarter. The credit availability indicator turned positive, indicating that access to debt finance is beginning to ease, although the improvement is uneven across borrowers and asset types.

Expectations for capital values were revised up for some prime segments. Prime industrial values are forecast to rise by 2% over the coming year, while prime office values are expected to increase by 1.9%. By contrast, survey participants foresee further declines for secondary office and retail assets, highlighting the ongoing divergence between higher-quality, well-located stock and weaker properties.

London continues to display greater resilience than many other parts of the country, particularly in the prime office and retail markets, where respondents expect both rental and capital value growth to outstrip the national average.

Alternative property sectors remain an area of relative strength in the survey. Data centres are viewed most positively, with respondents projecting rental growth of 4.6% and capital value growth of 5.2% over the next year. Aged care, multifamily residential, student housing and life sciences are also expected to record further, though more modest, gains.

Taken together, the Q4 2025 findings indicate that the UK commercial property market may be nearing a turning point, but any improvement is likely to be drawn out and uneven. Structural shifts in occupier demand, political uncertainty and the cost of finance continue to constrain activity, particularly for secondary assets and less favoured locations.

“The Q4 results suggest the UK commercial property market is beginning to find its footing after a prolonged period of adjustment,” said Tarrant Parsons (pictured right), head of market research and analysis at RICS. “While near-term conditions remain relatively soft, there are tentative signs that sentiment may be stabilising, with a modest uptick in the proportion of respondents detecting early recovery signals.

“Most notably, expectations for rental and capital value growth have been upgraded across prime markets, suggesting respondents are becoming more confident in the medium-term outlook. Overall, the market seems to be shifting towards more cautious optimism, though elevated financing co`ssts continue to temper the pace of any potential recovery.”