“The UK commercial property market appears to have weathered the initial shock from the escalation in geopolitical tensions earlier in the year reasonably well, with the tone from respondents this quarter noticeably more settled than in Q1,” said Tarrant Parsons (pictured right), head of market research and analytics at RICS.
“Occupier fundamentals continue to hold up, and there is tentative evidence that the sharp tightening in credit conditions seen earlier in the year is starting to unwind. That said, the pace of the recovery in investor sentiment remains modest, and respondents continue to flag caution given the wider macroeconomic backdrop.”
Nationally, prime office rental expectations strengthened from +39% to +51% over the next 12 months — the highest post-pandemic reading for the sector. Prime industrial rental expectations also rose to +45%, while secondary industrial rents moved into positive territory at +12%.
The gap between prime and secondary assets widened. Respondents forecast falling rents for secondary retail and office space, with net balances of -34% and -26% respectively. Vacant space increased during the quarter, with an all-sector availability balance of +20%, and landlords continued to offer substantial incentives to attract occupiers in the office and retail segments.
Data centres continued to benefit from AI-driven demand, with rental and capital value expectations exceeding net balances of +65%. Multifamily residential rents recorded a balance of +51%, while hotels and life sciences were expected to produce more modest gains. Leisure remained the most challenged alternative sector, with respondents forecasting declines in both rents and capital values.
