Q3 property investment of £8.8bn was exactly in line with Q2’s two-year low, according to Lambert Smith Hampton’s latest UK Investment Transactions (UKIT) report.

Download the latest UKIT Q3 2025 report here in full →

Report Highlights:

• UK property investment totalled £8.8bn in Q3 2025 – unchanged from the previous quarter
• Living sector investment rose 35% q-on-q to £3.8bn, buoyed by several large-scale deals in the PBSA segment
• Office and retail volumes both slipped back by 32% compared with Q2, partly due to shortages of investment stock
• Industrial investment rose by 24% q-on-q, driven by a rebound in multi-let transactions
• With multiple major deals due to complete by the year-end, volume is expected to improve markedly in Q4

Q3 volume belied activity

With ongoing economic uncertainty and reticence over the government’s upcoming Autumn Budget acting as a brake on investment activity, Q3 volume of £8.8bn was identical to Q2’s two-year low. However, the year is expected to end on a stronger note as a string of major deals are due to complete during Q4.

The Q3 volume reflected a shortage of large-scale deals, with only five transactions over £200m, compared with the long-term average of ten. More positively, the total number of deals climbed by 14% q-on-q and was 5% above average, indicating a relatively healthy depth to demand.

Living investment rebounds

Following a subdued first half of 2025, living volume rebounded by 35% q-on-q to £3.8bn, up 10% on the five-year average. The living arena was home to the quarter’s four biggest deals, topped by QuadReal’s £500m purchase of the Apollo student housing portfolio. Robust activity was seen across the living segments, but PBSA stood out with volume rising 60% q-on-q to £1.3bn.

Offices ready for lift-off in Q4

In sharp contrast, office volume slumped to £1.5bn in Q3, down 32% on Q2 and the lowest since the pandemic-afflicted period of Q2 2020. However, this reflected a combination of lower values and a lack of large transactions, with Q3’s 99 deals standing 15% above average and demonstrating a respectable depth to demand. Q3’s only £100m-plus deal was Delancey and Aware Super’s £140m (5.36% NIY) acquisition of Finsbury Circus House, EC2.

Nonetheless, sentiment towards offices is increasingly positive. Alongside strong rental growth for prime stock, evidence of rising staff occupancy and improving occupier demand are driving perceptions of value. Office volume is expected to rebound sharply in Q4, with 12 £100m-plus assets under offer in London at the end of Q3, the largest being Nuveen’s £340m disposal of 70 St. Mary Axe (the ‘Can of Ham’), EC3.

Lack of stock impacts retail volume

Retail volume slipped to £1.2bn in Q3, 34% below trend and the lowest since Q2 2023. Given improved stability and tentative signs of growth in the occupier market over the past couple of years, Q3’s outturn partly reflected a lack of stock, most notably shopping centres and retail warehousing.

Despite broadly on trend volume of £336m in Q3, shopping centre investment was dominated by Hammerson’s £319m (NIY 6.70%) purchase of a 50% stake in the Bullring and Grand Central, Birmingham from CPPIB. This was Q3’s biggest retail deal by a distance and was key to quoted propcos being the only net buyer of retail in the quarter.

At £1.8bn, Q3 industrial volume rose by 24% q-on-q, albeit it was still 28% below the five-year average. Multi-lets drove the rebound with £1.2bn of turnover, more than double Q2’s level and 22% above trend. In contrast, distribution warehouse volume of £637m was down 30% on Q2, and the weakest quarterly result since Q2 2020. Hence, multi-lets accounted for 65% of Q3 industrial volume, their highest share since Q1 2018.

Overseas investment remains robust

Overseas investors continued to drive UK volumes in Q3, with total inflows of £4.1bn, up 9% q-on-q but 29% below average. However, reflecting a flurry of large-scale disposals, net overseas purchasing amounted to only £936m, the lowest in five years.

Meanwhile, on the domestic front, having witnessed a rebound in Q2, institutional purchasing slipped by 38% q-on-q to £870m. The most resilient domestic buyer type was private propcos, whose collective purchasing of £1.9bn in Q3 was only 6% below trend level.

Pricing-wise, despite still-elevated yields in the gilt market during Q3, the cross-sector average prime yield hardened by 5bps during the quarter to 5.58%. This was mainly driven by yield compression in the shopping centre segment, supported by improved perceptions of value.

Ezra Nahome, CEO of Lambert Smith Hampton, commented:

“Q3 was another tepid quarter and appeared to reflect a general mood of inertia amid an uncertain economic backdrop. But, behind the scenes, the market has definitely livened up over recent weeks. Stock levels are up, indicating that sellers are ready to get on with business and plan ahead.

“However, the upcoming Autumn Budget remains a brake on the market and the fact it’s happening so much later in the year than usual is hampering decision-making. Assuming it passes peacefully, a marked improvement in activity and volume is in store. And frankly it’s what the market deserves, as despite such a globally turbulent year, politically and economically, UK property has performed in resilient fashion.

“Especially pleasing is the wave of big-ticket office deals that are in the hopper and await completion in London. After a long and painful period of adjustment, improving sentiment towards offices has been the missing piece in the recovery’s jigsaw, and I expect this to ripple across all corners of the UK in 2026.”

Download the latest UKIT Q3 2025 report here in full →