Despite mounting financial market headwinds, investment held up during Q3, driven by a rebound in industrial investment and continued strength in living, according to Lambert Smith Hampton's latest UKIT (UK Investment Transactions) report.

Download the latest UKIT Q3 2026 report here in full →

£9.7bn of property assets changed hands in Q3, down only 5% on Q2 despite a challenging backdrop that included a sharp repricing in global bond markets and renewed inflation concerns. Moreover, activity improved with deal numbers rising by 4% quarter-on-quarter and standing only 14% below the five-year average.

Large transactions again played a very significant role, with nineteen deals above £100m accounting for more than half of Q3’s total volume. Q3’s largest deal by a distance was Blue Owl Capital and Moor Park Capital Partners' colossal £1.3bn acquisition of Spire Healthcare's hospital portfolio.

Living once again commanded the leading share of investment in Q3, with volume of £4.2bn making up 44% of Q3’s total and 5% above average.  Activity was supported by strong demand for healthcare, as above, and a revival in the single-family housing market, where volume soared to just under £1bn.

Industrial and logistics was the strongest-performing sector against trend, however, with volume rebounding by 63% quarter-on-quarter to £2.5bn, 10% above average. Large portfolio transactions and a resurgence in overseas capital were key drivers, with North American investors particularly active.

Q3 was less impressive as far as retail and offices were concerned. Following several stronger quarters, office volumes softened to £1.9bn in Q3. This was largely due to a lack of major Central London transactions compared with before, while office investment in the UK regions remained subdued.

Meanwhile, following an exceptionally strong second quarter, retail volume also fell back sharply to £919m, largely reflecting a lack of suitable stock on the market. Major shopping centres nevertheless remain highly sought after from a core group of established players. Q3 included Hammerson's £218m acquisition of a 50% stake in Manchester Arndale, while Land Securities recent acquisition ofthe Metrocentre, Newcastle for £516m will give a boost to Q4 retail volumes.

Overseas investors continued to account for the majority of UK investment activity, with inflows of £4.9bn making up 51% of the total. However, significant disposals during the quarter pushed net overseas purchasing down to a record low of £278m. North American buyers remained dominant, accounting for 58% of all overseas inflows.

Domestic investors were more active during the quarter. Institutional purchasing rebounded by 75% quarter-on-quarter to £1.2bn, boosted by Border to Coast's acquisition of Leaf Living's single-family rental portfolio, while private property companies were the largest domestic buyers overall, investing £1.6bn.

Reflecting the more challenging financial climate, notional prime yields softened more widely during Q3, with the cross-sector average moving out by 13bps to 5.76%. This outward shift was the biggest since Q4 2024 and was largely driven by a softening across industrial and parts of the living area, with London and regional BTR yields both softening by 25bps. In contrast, prime retail yields held steady across all segments.

The report notes that recent volatility in global bond markets has created short-term headwinds for real estate pricing, with higher gilt yields increasing pressure on returns and financing costs. However, resilient occupier demand, constrained development and continued rental growth across many sectors are helping to support underlying market fundamentals.

 Ezra Nahome, CEO of Lambert Smith Hampton, commented:

"The market increasingly feels like a tug of war between resilient occupier fundamentals and increasingly challenging financial conditions, with rising inflation now widely expected to lead to interest rate rises.

"Higher gilt yields arising from the recent global bond sell-off have placed upward pressure on property yields, further reinforcing the importance of income in driving performance. Despite these challenges, investment activity has remained remarkably resilient, underlining the continued income-generating appeal of UK real estate.

"Attention now turns firmly to the Budget. Following the recent rise in government borrowing costs, investors will be closely watching for signals around fiscal discipline and policies designed to support longer-term economic growth.

"Amid challenging conditions, investors should avoid confusing short-term market volatility with a deterioration in underlying fundamentals. Real estate continues to benefit from supply constraints, positive rental prospects and deep pools of capital, leaving the sector well positioned to reward selective and proactive investors over the medium term."

Download the latest UKIT Q3 2026 report here in full →