Overseas investment into UK property slows sharply in early 2026 amid global uncertainty and weaker dollar

Overseas investment into UK commercial property slowed sharply in the first quarter of 2026 as global investors became more cautious amid economic and geopolitical uncertainty, a weaker US dollar and continuing concerns around the viability of deploying capital into new development and asset upgrades in the UK.

The latest annual report from Real Estate:UK, the single voice representing the £950 billion UK commercial property sector, and CoStar Group, a leading provider of property market data and analytics, shows total UK commercial property investment reached £9.7 billion in Q1 2026, almost 40% below the five-year first-quarter average.

Overseas capital accounted for £3.6 billion of investment in Q1, with inflows from the US easing significantly following a record year in 2025. The slowdown suggests that the weaker dollar may already be affecting the relative attractiveness of UK assets for overseas buyers, with elevated financing costs and wider global uncertainty also contributing to a more cautious investment environment.

Despite the weaker overall quarter, offices emerged as a relative bright spot. The sector attracted £2.9 billion of investment in Q1 2026, accounting for 30% of total volumes, with activity concentrated in London and a small number of major regional cities. By contrast, industrial investment recorded its weakest quarterly performance in nearly six years, while retail activity remained subdued.

The subdued first quarter follows a strong 2025, with foreign inflows rising 33% year-on-year to £27.2 billion, the fourth strongest year on record, and accounting for a record 56% share of all UK commercial property investment activity.

As in previous years, the US remained by far the largest overseas investor into UK property. American investors deployed £18.2 billion during 2025, driven partly by major healthcare acquisitions, including Welltower’s multi-billion-pound purchases of care home portfolios from Barchester Healthcare and HC-One. Even excluding those landmark transactions, the report finds that US capital continued to dominate overseas investment into UK real estate, supported by favourable currency conditions and demand for stable, long-term income-producing assets.

European capital also became more active during 2025 with French investors deploying more than £1 billion into UK real estate, driven largely by SCPI funds targeting diversified regional assets, while Norwegian and Swedish investors focused on large-scale strategic transactions, including mixed-use London estates, hotels and logistics. Japanese investors were also increasingly active towards the end of the period, particularly in London and the South East.

In terms of asset classes, healthcare was the standout sector in 2025, reflecting strong investor conviction in operational real estate underpinned by long-term demographic demand. Build-to-rent investment also reached a record £5.6 billion as overseas investors continued to target professionally managed rental housing, while office investment recovered modestly amid improving sentiment towards prime assets in London and key regional cities. At the same time, multi-region portfolio transactions rose sharply, highlighting growing investor preference for scale and defensive income streams across sectors including healthcare, logistics and living.

The report highlights continued investor demand for operational real estate sectors such as healthcare, build-to-rent housing, data centres and life sciences, where long-term structural demand continues to support investment activity.

Melanie Leech, Interim Chief Executive, Real Estate:UK, said: “The UK continues to attract substantial international capital into real estate, reflecting the sector’s long-term strengths and the country’s reputation as a stable and transparent place to invest. The strong performance in 2025 demonstrated continued confidence in UK real estate, particularly in sectors such as healthcare, rental housing and operational assets.

“However, the significantly weaker start to 2026 highlights how sensitive international capital flows are to changes in the wider economic and geopolitical environment. Sterling’s appreciation against the dollar may also be eroding some of the pricing advantage that helped drive exceptionally strong US investment into UK real estate during 2025.

“At the same time, investors continue to raise concerns about the challenges of deploying capital into new development and upgrading existing assets in the UK. Elevated construction costs, regulatory delays and policy uncertainty are all affecting development viability and investor confidence at a time when attracting long-term capital into housing, infrastructure and commercial real estate is critical to supporting economic growth.”

Grant Lonsdale, Senior Director of Market Analytics, CoStar Group, said: “CoStar’s data highlights the sharp contrast between a strong 2025 and a much quieter opening quarter in 2026.

“While uncertainty has clearly weighed on activity in early 2026, investor appetite for UK real estate has not disappeared. We are beginning to see signs of a rotation back towards prime office assets, particularly in Central London and major regional cities, where constrained supply of high-quality Grade A space is supporting occupier demand and investor interest. More broadly, the quarter reinforced an ongoing flight to quality across real estate markets, with capital remaining focused on the best-performing sectors and assets.”