UK real estate markets were resilient in the first half of 2026 despite a more challenging economic and geopolitical backdrop, according to CBRE’s mid-year review.
CBRE now forecasts UK GDP growth of 0.9% in 2026, revised down from 1.2% at the start of the year. Inflation is expected to peak at around 3.5% in Q4, while interest rates are expected to remain unchanged.
The report found investment momentum had softened in H1 2026 amid geopolitical volatility, with UK deal volumes totalling £23bn, down 8% year-on-year. However, the UK received the most investment in H1 across Europe, as prime assets and core locations continue to outperform secondary stock.
Tasos Vezyridis, head of European research at CBRE, said: “The first half of 2026 has been shaped by geopolitical conflict, inflation concerns and a changing political landscape. Despite this, the occupational market is robust, debt markets remain liquid, and demand for prime assets continues to exceed supply in many sectors.”
Occupier demand for offices remained strong, with central London take-up expected to broadly match 2025 levels, supported by technology, media and telecommunications occupiers, particularly AI firms. By the end of H1, AI-related leasing activity totalled 0.7m sq ft in central London.
Rental demand remains strong in the living sector, with diminishing future supply pipelines and government-backed housing initiatives expected to support investment. Living sector investment volumes are forecast to reach more than £13bn by the end of the year, up 4.1% year-on-year and a new record-high for the sector.
Demand from third-party logistics operators (3PLs), manufacturers and retailers continues to underpin activity, with 3PL occupiers accounting for 45% of H1 2026 take-up. Constrained development will limit new supply entering the market. While the development pipeline grew 6% in H1 to 19.9m sq ft, the rise was driven mainy by build-to-suit schemes, which now account for two-thirds of space under construction.
Data centres continue to be one of UK property’s strongest-performing subsectors and demand from hyperscalers, cloud providers and AI occupiers is expected to drive record take-up in London, exceeding 200MW for the first time. While London accounts for 83% of UK data centre supply, land and power constraints are encouraging expansion into adjacent markets.
Retail parks continue to outperform the wider retail sector, supported by low vacancy rates and strong occupier demand, while prime central London locations and leading shopping centres benefit from constrained supply and rental growth. CBRE expects retail sales growth of 1.8% in 2026, broadly in line with last year.
Vezyridis said: “Resilience has been evident across much of the UK real estate market. While uncertainty remains, the underlying fundamentals continue to provide a solid foundation for activity.
“Looking ahead to the remainder of the year, we expect confidence to continue building and capital to be deployed across a broader range of opportunities, particularly in sectors linked to artificial intelligence, digital infrastructure and defence.”
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