The UK commercial property market remains subdued, but early signs of stabilisation are emerging as sentiment improves modestly across occupier and investment markets, according to the latest RICS UK Commercial Property Monitor for Q4 2025.
While elevated borrowing costs and a challenging macroeconomic backdrop continue to weigh on activity, survey respondents reported a gradual improvement in confidence. Notably, 32% of contributors now believe market conditions are consistent with the early stages of an upturn, up from 27% in Q3.
The Occupier Sentiment Index improved slightly to -10, from -12 in the previous quarter, signalling that downward momentum may be easing. Tenant demand continues to fall overall, with the steepest decline still seen in retail, while office and industrial sectors showed marginally less negative trends.
Available space continues to rise across all major sectors, although the pace of increase has moderated. Landlords continue to offer higher incentives to attract occupiers, reflecting competitive market conditions. However, rental expectations for prime assets edged higher, with prime office rents now forecast to grow by 2.5% over the next twelve months, and prime industrial rents by 2.1%. On the other hand, secondary assets remain under sustained pressure.
Investment market sentiment remains negative overall, with the Investment Sentiment Index registering -9, although this represents a slight improvement on Q3. Investor enquiries remain weak across offices, retail and industrial property.
One notable positive development is the improvement in lending conditions. The credit availability indicator turned positive in Q4, suggesting that access to finance is slowly easing, albeit unevenly.
Capital value expectations have also been revised upwards for some prime assets. Prime industrial values are expected to rise by 2%, while prime office values are forecast to increase by 1.9% over the coming year. In contrast, secondary office and retail values are still expected to decline, underlining the continued bifurcation between prime and secondary property.
London continues to demonstrate relative resilience, particularly in prime office and retail markets, where rental and capital value growth expectations exceed national averages.
Alternative property sectors remain a bright spot. Data centres stand out as the strongest performer, with respondents forecasting rental growth of 4.6% and capital value growth of 5.2% over the next year. Aged care, multifamily residential, student housing and life sciences are also expected to deliver positive, if more modest, growth.
Overall, the Q4 2025 results suggest the UK commercial property market may be approaching a turning point, but recovery is expected to be gradual and uneven. Structural challenges, political uncertainty and the cost of finance continue to constrain activity, particularly for secondary assets and weaker locations.
RICS Head of Market Research & Analysis, Tarrant Parsons, said: “The Q4 results suggest the UK commercial property market is beginning to find its footing after a prolonged period of adjustment. While near-term conditions remain relatively soft, there are tentative signs that sentiment may be stabilising, with a modest uptick in the proportion of respondents detecting early recovery signals. Most notably, expectations for rental and capital value growth have been upgraded across prime markets, suggesting respondents are becoming more confident in the medium-term outlook. Overall, the market seems to be shifting towards more cautious optimism, though elevated financing costs continue to temper the pace of any potential recovery.”
