The UK commercial property market is moving into a stronger position in 2026 as lower borrowing costs, improving liquidity and more active lenders support renewed transaction activity.
The Bank of England base rate has fallen from 5.25% in mid-2024 to 3.75%, easing pressure on borrowers and improving the economics of refinancing, acquisitions and development. Financing is still more expensive than it was during the low-rate era, but the direction of travel is more supportive.
Around £10.9 billion was invested in UK commercial property during the second quarter of 2026. Deal volumes remain below historic norms, but the rolling annual investment total has reached approximately £49 billion, close to the five-year average. The market is also expected to expand over the medium term. The UK commercial real estate sector is estimated at $153.33 billion in 2026 and is projected to reach $184.58 billion by 2031.
Demand is concentrating on modern, well-located and energy-efficient buildings that meet current occupier requirements. In major city centres, limited new supply and pre-letting activity are tightening availability of higher-quality space.
Older office assets face a different outlook. Proposed energy efficiency requirements mean larger privately rented non-domestic buildings are expected to work towards an EPC B standard by 2031 where cost-effective. The extended timetable reduces immediate pressure, but refurbishment costs remain a material consideration when assessing older buildings.
Industrial and logistics property also remains well positioned. Demand continues to be supported by e-commerce, distribution networks and supply-chain requirements, while development constraints limit the amount of new stock in some locations. Modern buildings with strong transport links and better energy performance are likely to remain more competitive.
SME developers and property owners that faced refinancing pressure during the higher-rate period now have access to a wider range of funding options. Specialist lenders, non-bank finance providers and private capital are showing more willingness to support projects with clear fundamentals and realistic exit plans.
Alternative finance is becoming increasingly important where traditional senior debt is not sufficient. Joint ventures and mezzanine funding can help bridge financing gaps, although they also add complexity through higher costs, shared control or profit participation.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
