Higher borrowing costs and tighter lending conditions are having an impact on the UK commercial property investment market, according to the latest UK Commercial Property Monitor produced by the Royal Institution of Chartered Surveyors (RICS).
The Q3 2026 survey shows investment sentiment weakening as rising gilt yields put further pressure on the outlook for property values.
The credit conditions indicator fell to a net balance of -37%, from -23% in Q2, signalling a more restrictive lending environment. Meanwhile, the investment sentiment Index declined to -13 from -8, with the majority of respondents now viewing the market as being in a downturn.
Investment enquiries weakened to a net balance of -11%, compared with -8% in the previous quarter. Overseas investment demand also remained negative across offices, retail and industrial property for a fifth consecutive quarter.
Tarrant Parsons, head of market research and analysis at RICS, said: “The latest survey results point to a more challenging backdrop for the commercial property market, with the investment side bearing the brunt of higher borrowing costs following the recent rise in gilt yields to their highest levels in almost two decades. As financing conditions have tightened, expectations for capital value growth have softened, particularly in the near term.
“That said, market conditions remain far from uniform. Occupier demand has proven relatively resilient, albeit somewhat less robust than in the previous quarter. Prime offices and industrial assets continue to outperform, with respondents still anticipating rental growth and modest capital value appreciation across these segments over the year ahead. In contrast, sentiment towards secondary assets has weakened further, highlighting an increasingly pronounced divergence in performance across the market.”
