Planning delays, enduring viability issues and regulatory changes have culminated in a sharp drop-off in overseas investment into the UK real-estate market in the opening months of this year.
Between January and March foreign investors spent £3.6 billion acquiring commercial property, down 30 per cent from the £5.2 billion recorded in the opening three months of 2025, according to data from Real Estate:UK, the industry body, and CoStar, a property analytics group.
Including domestic funds, total UK commercial property investment reached £9.7 billion in the first quarter, almost 40 per cent below the five-year average.
The report suggests the drop-off, which came even before the war in Iran, reflected “continuing concerns around the viability of deploying capital into new development and asset upgrades in the UK”.
Investors will often buy older buildings with a view to either knocking them down and building anew, or improving them with extensive renovations. There are mounting worries that, at the moment, the cost and time involved with either of those options makes them unviable.
“Delays at the building safety regulator grew during last year and, while the situation appears to be improving, it is still a cause of delay and thus cost for investors,” Real Estate:UK and CoStar say in their report.
“Further, the sudden and untrailed ban on upward-only rent reviews, the delayed homes penalty proposal, the forthcoming building safety levy and the reorganisation of much of English local government add either cost or uncertainty, as well as potentially further delay, to the investment climate.”
Those concerns have also been voiced by UK-based companies in recent weeks. Great Portland Estates blamed the planning system for London office development grinding to a halt, and most of the major housebuilders, including the likes of Berkeley and Barratt Redrow, have slowed their expansion plans as they grapple with viability amid increased red tape.
The subdued start to this year followed what had been a strong 2025, with foreign inflows into the commercial property market rising 33 per cent to £27.2 billion, which was the fourth-strongest year on record.
The US was, once again, where the largest part of that money came from, with American investors deploying £18.2 billion last year, more than half of which went into healthcare property. Welltower, for example, paid £5.2 billion for a portfolio of care homes previously owned by three of Ireland’s richest men: JP McManus and John Magnier, the horse racing tycoons, and their business partner Dermot Desmond, Celtic FC’s largest shareholder.
Americans have been lured to the UK in recent years by “favourable currency conditions”, the report says, but inflows from the US have “eased significantly” so far in 2026.
“Sterling’s appreciation against the dollar may also be eroding some of the pricing advantage that helped drive exceptionally strong US investment into UK real estate during 2025,” Melanie Leech, interim chief executive of Real Estate:UK, said.
The war in Iran is expected to have hit investment levels again over spring and into summer, given it will almost certainly have dented “investor willingness to undertake deals and particularly new development”, the report said.
