Demand across much of the commercial property market softened in the first quarter of 2026 as geopolitical uncertainty and expectations of higher interest rates tempered appetite for deals.
According to Rightmove’s Commercial Insights Tracker for Q1 2026, three of the four main commercial sectors recorded year-on-year declines in both leasing and investment demand, with only industrial and logistics continuing to post growth.
Office leasing demand fell 3% year-on-year, while demand to invest dropped 9%. Retail recorded falls of 9% in leasing demand and 2% in investment demand, while leisure saw declines of 11% and 14% respectively.
Industrial and logistics remained the outlier, with leasing demand up 6% and investment demand rising 13%, underlining the sector’s continued appeal for investors and operators despite wider market caution.
DEMAND REMAINS ROBUST
Lewis Rapley, Logistics Research Associate, Commercial Research, at Savills, says: “In terms of leasing for sheds across the UK over 100,000 sq ft (big box), Q1 2026 take-up totalled 7.6 million sq ft, which is 11% higher than the same quarter last year.
“It was also 16% higher than Q4 2025, which showed momentum continued into the new year. 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.”
Vincent Scammell, Director of Sales and Operations at BizSpace, says demand for industrial space was still being supported by longer-term structural shifts.
“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.”
RISING DEMAND
He adds: “We are also seeing rising demand from defence-adjacent sectors, particularly across heavy manufacturing, technology and R&D supply chains, supported by increased government defence spending across Europe. With urgency high, existing stock remains the only scalable solution.”
However, the year-on-year declines come against a strong base in Q1 2025, particularly in offices, retail and leisure, suggesting the latest falls are more of a slowdown than a collapse in appetite.
Overall demand to invest in commercial property fell 5% year-on-year but was still 10% higher than at the same point two years ago.
Office investment demand, despite the annual decline, remained 53% above where it stood two years ago, while retail and leisure also remained ahead of 2024 levels.
MIDDLE EAST UNCERTAINTY
Andy Miles, Managing Director, Commercial, at Rightmove, says: “The uncertainty from the fallout of the war with Iran may have given both businesses and investors a reason to pause for thought.
“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.”
For bridging lenders and specialist investors, the figures point to a market where caution is rising, but where well-priced assets and clear repositioning opportunities may still attract attention, particularly in operational sectors with resilient income profiles.
RESILIENT ACTIVITY
And Darren Bond, Global Managing Director at Christie & Co, adds: “Activity across our specialist operational real estate sectors was resilient in the first quarter of this year, supported by continued demand for businesses with strong fundamentals and sustainable underlying income.
“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.
“As we move further through the year, realism on pricing and clarity around business sustainability will remain key to maintaining momentum across these markets.”
