Capital flows, regional shifts, a sceptic’s view of rent review reform

The UK commercial property market shows resilience in the face of new challenges. 

New data shows over £57 billion was invested in UK commercial real estate in 2025. And Yorkshire was challenging London on average deal values. But high street woes and a rent review ban still haunt the retail market.

The decades-long decline of Britain's high streets stems from a combination of issues. Changing consumer buying habits, particularly through online purchases and home delivery, the closure of many destination shop retail brands, a banks closure programme, plus soaring operating costs involving business rates and the cost of employing staff.

On top of all this, many failing high streets have seen an influx of vape shops, betting shops, and American candy stores, some of which are linked to organized crime and money laundering.

Government intervention

There has been a year’s long succession of government interventions, a multi-billion-pound regeneration fund, specialized crime units, one scheme where the local authority can auction off vacant high street properties for rent and more lately the upward only rent review ban. None of these initiatives appear to have made an appreciable difference.

The government has launched major investment schemes, including the Pride in Place programme, which injects up to £5 billion across hundreds of neighbourhoods to upgrade public spaces, green areas, and local facilities.

The High Streets Task Force  is an organization set up by the last government under the Department for Levelling Up, Housing and Communities to provide local authorities with tailored guidance on diversifying town centres away from strict retail.

The data tells the story

Two significant data releases this month offer the best picture yet of where UK commercial property stands in 2026. The first is a joint annual report from Real Estate: UK and the CoStar Group: Who invests in UK property 20256. This new report tracks the origin, scale and destination of UK property investment through 2025 and into Q1 2026. 

The second data source is a transactional analysis from Property Inspect, released ahead of the UK Real Estate Investment & Infrastructure Forum (UKREiiF) in Leeds. This report covers deal completions across Britain so far this year. 

Alongside both of these sources is a timely assessment from Nick Leavey, commercial property partner at law firm Morr & Co LLP. His thesis is that the government’s ban on upwards-only rent reviews (UORRs), legislation which received Royal Assent on 29 April 2026, won’t in reality deliver its desired result. 

Readers who followed our earlier analysis of the UORR legislation on LandlordZONE ("End of upward-only rent reviews: what does it mean for landlords?", 30 April 2026) will already be familiar with the issues here. This article takes a wider perspective, looking at the investment flows that underpin the UK’s commercial property market and considers whether the rent review reform fits intelligently into that wider picture. 

The bigger picture: investment has held up

According to the CoStar/Real Estate: a UK report, total UK commercial property investment edged up to just over £57 billion in 2025, that’s from £56 billion in 2024. The increase is only modest, but nevertheless the direction matters. This rise in activity came against a backdrop of high borrowing costs, global turbulence and a domestic legislative environment that the report’s authors describe as adding ‘cost or uncertainty’ to the investment climate.

What is most striking is the composition of that new investment. Overseas capital accounted for a full 33 per cent year-on-year to £27.2 billion. That's 22 per cent above the long-term average and the fourth strongest year on record for foreign investment into UK real estate. Foreign buyers accounted for a record 56 per cent of all activity, meaning that for the first time ever, more than half of all UK commercial property investment came in from abroad. 

The United States leads the way

The major investment force has been the United States, by some distance. US investors dominate, accounting for 73 per cent of the combined value of the top ten investing countries. This high figure was inflated somewhat by Welltower’s £6 billion-plus acquisition of more than 550 care homes from Barchester Healthcare and HCOne. 

Even if you strip out this one major deal, the direction of travel is unchanged. US capital continues to flow into the UK encouraged by favourable currency conditions, a retreat from domestic US markets, and deep pools of private equity seeking stable, long-term income.

The next nine largest investing countries combined deployed £6.9 billion. That’s 37 per cent of what the US alone invested. France (led by diversified SCPI funds), Norway (through Norges Bank’s £875 million stakes in Shaftesbury and Grosvenor’s mixed-use London estates), and Canada, Sweden and Spain were all active investors. 

None of them came close to matching America in scale. The Real Estate:UK commentary in the report makes the point very plainly: this level of “dependence on a single overseas source of capital is a structural vulnerability”, and the report calls on the government to co-host an international investment summit to diversify the UK’s appeal.

Into 2026

The Q1 2026 picture is more subdued. Total commercial property investment came in at £9.7 billion for the quarter, that’s nearly 40% below the five-year first-quarter average and less than half of the exceptional Q4 2025, when US investors alone deployed close to £10 billion into healthcare assets. 

The escalating conflict in the Middle East has undoubtedly unsettled markets toward the end of the quarter, the consequences of higher energy costs, inflationary pressures, and renewed uncertainty over interest rates. These factors are expected to weigh heavily on Q2 data.

London still leads, but Yorkshire is the regional success story of 2026

Property Inspect’s analysis, draws on transactional data sourced from PropertyData, records with approximately £5.08 billion of commercial property transactions completed across Britain in 2026 so far. According to these sources, around 404 deals at an average value of £12.57 million were transacted. 

Sian Hemming-Metcalfe, Operations Director at Property Inspect, presented the findings ahead of UKREiiF (19–21 May, in Leeds) This is one of the principal UK annual gatherings for public and private sector property professionals.

However, London’s dominance remains. London accounts for 38.9 per cent of total national commercial property investment in 2026 to date, with the highest average transaction value at £23.23 million. 

The CoStar/Real Estate:UK data confirms this. London attracted £15 billion in 2025, just 4 per cent below its long-term average, supported by a revival in appetite for large office deals. Nineteen transactions of £100 million or more completed in the capital in 2025, that’s up from eleven the previous year.

The regional story, however, is headed by Yorkshire & Humber. With an average transaction value of £16.49 million, the region comes second only to London, well ahead of the South East (£11.53 million average) and representing 9.1 per cent of national commercial property investment so far this year. 

In absolute terms, £461.6 million of transactions completed in Yorkshire & Humber in 2026 to date. Scotland (£14.22 million average), the North East (£14.10 million) and the East Midlands (£14.02 million) also recorded solid deal values.

Sián Hemming-Metcalfe, Operations Director, Property Inspect says:

"There is still a huge amount of capital targeting quality assets, particularly in regions where regeneration, infrastructure investment, and evolving occupier demand are creating long-term opportunities. Yorkshire is a good example of that shift, with strong average transaction values reflecting growing confidence in regional cities and development corridors outside the traditional London focus." — 

The report shows that Wales and the South West lag considerably, each accounting for less than 1.5 per cent of total national transaction value. That regional difference is confirmed when the CoStar/Real Estate:UK data is compared with Property Inspect’s 2026 figures. 

The report shows that the sectors leading the charge were healthcare, offices and build-to-rent, with logistics stumbling:

Offices staged a meaningful revival to £11 billion in 2025, with overseas buyers accounting for roughly a third. Build-to-rent (BTR) reached a record £5.6 billion in 2025, reflecting sustained recognition among global investors that the UK’s undersupply of professionally managed rental housing offers long-term resilience. 

Logistics, long the commercial market’s strongest performer, continued to underperform. For the first time in 12 years, less than £1 billion was deployed into London warehouses in 2025. 

Two growth areas well worth noting for landlords and investors with an eye on longer-term opportunities are data centres and life sciences. UK data centre inventory has expanded by almost 40 per cent over the past decade, with growth accelerating sharply in the past year on AI adoption.

The rent review ban

The legislation introduced by Labour is well-intentioned, but will the market simply adapt?

As I reported in detail last month, the English Devolution and Community Empowerment Act 2026 bans upwards-only rent review clauses in new commercial leases entered since 29 April 2026, with commencement of the full provisions expected in 2027. 

Nick Leavey, commercial property partner at Morr & Co LLP, has studied the reform closely, including looking at what has happened since Ireland introduced comparable legislation in 2010.

His assessment is cautious; he’s not hostile to reform in principle, but he’s sceptical that it will deliver the scale of change the government expects. Nick Leavey says:

"The government’s proposed ban on upwards-only rent reviews is undoubtedly well-intentioned, particularly at a time when so many businesses on the high street are already under pressure. But I would be surprised if it ends up having the dramatic impact that some people are expecting."

The Irish precedent is instructive. When Ireland banned UORRs, the commercial property market adapted its behaviour rather than fundamentally changing direction. Landlords found workarounds. 

They fixed annual uplifts that give tenants certainty over future rents, but not necessarily lower ones. They also signed shorter leases. This has the effect of reducing landlord exposure to a mechanism no longer guaranteed to rise in value. However, it adds to transactional costs for tenants (legal fees, surveyor charges, stamp duty). Leavey says he expects to see similar methods used in England and Wales.

What strikes him as particularly unlikely is what the reform’s advocates claim: rents on the high street will actually fall. “The idea of rents going down seems very unlikely,” he says. “I don’t think this legislation is going to help tenants as much as it is intended to.”

This view reinforces similar comments from the British Property Federation and lawyers at Osborne Clarke, that I covered in the earlier article. What Leavey adds that is specifically useful for smaller commercial landlords is a ground-level perspective on how lease renegotiations will evolve in practice. 

His advice is straightforward: prepare for a different regime, understand that the options available to you are changing, but do not assume that tenants will automatically benefit at your expense. The market, as it has done before, will adapt and find a new equilibrium.

For landlords holding mixed portfolios, retail units alongside residential properties, for instance, or light industrial premises alongside housing, this is not an abstract debate. The UORR ban applies to all business tenancies that fall within the scope of the Landlord and Tenant Act 1954. 

If you are a landlord who also lets commercial premises, even on a modest scale, the lease structures you use for new lettings from now on need careful thought and professional input.