(Alliance News) – Demand for commercial property in the UK fell in the first quarter of 2026 compared to a strong year earlier, as geopolitical uncertainty and interest rate expectations weighed on activity, according to data from Rightmove.
Rightmove’s commercial insights tracker showed that three of the four main sectors recorded year-on-year declines in both leasing and investment demand.
The office sector saw leasing demand fall 3%, and investment demand drop 9%, while leisure declined 11% and 14%, respectively. Retail also weakened, with leasing down 9% and investment demand falling 2%.
By contrast, the industrial and logistics sector continued to outperform, with leasing demand rising 6% and investment demand up 13%.
Andy Miles, managing director of commercial at Rightmove, said the backdrop of geopolitical tension had made decision-making more challenging.
“The uncertainty from the fallout of the war with Iran may have given both businesses and investors a reason to pause for thought,” he said.
“At a time when many analysts are predicting two or even three increases to the Bank of England’s base rate this year, decision making becomes difficult.”
Despite the declines, Rightmove noted that the falls were from a high base, following strong demand in 2025 across offices, retail and leisure.
Overall investment demand for commercial property was down 5% from a year earlier, but remained 10% higher than two years ago.
Office investment demand, while lower on-year, was still 53% higher than two years ago, reflecting the strength of last year’s market.
External data pointed to continued resilience in logistics. Savills said take-up for large warehouse space exceeded 100,000 square feet totalled 7.6 million square feet in the first quarter, up 11% from a year earlier and 16% from the previous quarter.
Lewis Rapley from Savills said demand remained robust despite uncertainty.
“While the full impact of the war in Iran is still too early to tell, it is encouraging to see demand and viewings/enquiries remain robust,” he said.
Industry participants also highlighted structural demand trends supporting the industrial segment.
Vincent Scammell at BizSpace said small and medium-sized enterprises are increasingly prioritising flexibility and resilience.
“Despite a more uncertain geopolitical backdrop weighing on some sectors, demand for industrial space continues to grow,” he said.
“This reflects a longer-term shift, with SMEs prioritising operational resilience, supply chain flexibility and access to well-located space over long-term fixed commitments.”
He added that demand from defence-related industries is also rising, supported by increased government spending across Europe.
Meanwhile, Darren Bond at Christie & Co said activity remained resilient in specialist real estate segments, though investors are becoming more selective.
“While decision-making is being shaped by interest rate expectations and cost pressures, well-priced opportunities continue to be attractive, particularly where businesses are well run and performance is clearly evidenced,” he said.
Bond added that pricing realism and clarity on business sustainability will be key to maintaining momentum in the months ahead.
By Eva Castanedo, Alliance News reporter
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