- Overseas investment into UK commercial property dropped 30 per cent in the first quarter of 2026.
- Foreign investors spent £3.6 billion between January and March, down from £5.2 billion a year earlier.
- Industry groups say planning delays and regulatory uncertainty are hurting investor confidence.
Foreign investment into the UK commercial property market has fallen sharply at the start of 2026, with investors increasingly stepping back from new development projects as planning delays, higher compliance costs and regulatory uncertainty continue to weigh on the sector.
According to new data released by Real Estate:UK and property analytics firm CoStar Group, overseas investors spent around £3.6 billion on UK commercial property acquisitions between January and March. That marked a 30 per cent decline from the £5.2 billion recorded during the same period in 2025.
The slowdown was not limited to foreign investors. Total UK commercial property investment, including domestic capital, reached £9.7 billion during the quarter, nearly 40 per cent below the market’s five-year average.
The weaker investment climate appears to reflect growing concerns around whether large-scale property development in the UK is still financially viable, particularly for ageing office buildings and urban redevelopment projects.
Development plans stuck in slow motion
Many investors typically buy older commercial properties with plans to either demolish and rebuild them or carry out major upgrades. But industry groups suggest that process is becoming increasingly difficult because of planning bottlenecks, safety approvals and additional regulatory costs.
In the report, Real Estate:UK and CoStar reportedly said delays linked to the UK’s building safety regulator worsened during 2025 and continue to add both time and cost pressures for developers.
The report also pointed to several policy changes that are creating further uncertainty across the sector, including the proposed ban on upward-only rent reviews, the delayed homes penalty proposal, the upcoming building safety levy and wider restructuring of English local government systems.
Together, those measures are making investors more cautious about committing capital to long-term projects.
Several major UK property companies have already warned about the impact. Great Portland Estates recently blamed the planning system for slowing office development activity in London, while housebuilders including Berkeley Group and Barratt Redrow have reportedly scaled back expansion plans amid rising regulatory pressure and weaker project economics.
US money slows as global uncertainty grows
The slowdown follows what had actually been a strong year for UK commercial property in 2025.
Foreign investment inflows rose 33 per cent last year to £27.2 billion, making it the fourth-strongest year on record. Much of that money came from the US, where investors poured around £18.2 billion into the UK market, with healthcare property emerging as one of the most active sectors.
One of the biggest deals involved Welltower, which paid £5.2 billion for a portfolio of care homes previously owned by Irish businessmen JP McManus, John Magnier and Dermot Desmond.
But that strong flow of US capital now appears to be easing.
Melanie Leech reportedly said sterling’s recent strength against the dollar may be reducing some of the pricing advantages that attracted American investors into the UK market during 2025.
Industry observers also expect geopolitical tensions, including the conflict involving Iran, to have further weakened investor appetite through spring and early summer, especially for riskier development-led projects.
For now, the UK property market appears caught between tighter regulation, rising development costs and a more cautious global investment environment, a combination that is making investors think twice before committing fresh capital.
