Credit conditions weaken as UK commercial property market feels geopolitical uncertainty

RICS UK Commercial Property Monitor Q1 2026

The Royal Institution of Chartered Surveyors (RICS) UK Commercial Property Monitor for Q1 2026 found a clear shift in market mood following the recent escalation of geopolitical tensions in the Middle East. Respondents frequently cited renewed uncertainty, rising bond yields, energy cost pressures and inflation concerns as factors weakening confidence.

The most notable change was in credit conditions, with the RICS credit conditions indicator falling sharply to -44% in Q1, down from +9% in Q4 2025. This is the weakest reading for credit conditions since Q3 2023. At the same time, twelve-month capital value expectations weakened across the market, with the all-property net balance moving to -18%, compared with -5% previously.

Despite the more cautious investment backdrop, occupier market conditions appear to have been less affected so far. The headline Occupier Sentiment Index stood at -10, broadly unchanged from the previous quarter. Tenant demand at the all-property level recorded a net balance of -8%, compared with -9% in Q4.

Prime rental expectations remain positive in parts of the market. Prime office rents are expected to grow by 2% over the next 12 months, while prime industrial rents are forecast to rise by 2.1%. Prime retail rents, however, are expected to edge slightly lower, with a projected fall of 0.5%.

London continues to show relative resilience, particularly across prime office occupier markets. Prime office rents in the capital are expected to rise by 2.5% over the year ahead, although this is below the 3.3% growth expected in the previous quarter. Prime London office capital value growth has also been revised down to around 0.9%, compared with 2.8% in Q4.

Alternative sectors continue to outperform traditional mainstream sectors, although expectations have also moderated. Data centres remain the strongest-performing segment, with rents expected to rise by 3.5% and capital values by 3.3% over the next 12 months. Aged care facilities, multifamily residential and life sciences are also expected to deliver modest growth.

RICS Head of Market Research & Analysis, said: "The occupier side of the commercial property market has, to date, shown little visible impact from the increasingly difficult global geopolitical environment, with survey indicators tracking demand levels, availability and rental expectations largely unchanged since late last year. However, the negative macroeconomic consequences of the conflict in the Middle East are evident in the investment market, most notably through tighter credit conditions and growing caution around near-term capital values. This is weighing on confidence just as the market had begun to display tentative signs of recovery. Whether this represents a short-term interruption or the beginning of a more prolonged slowdown will depend on how quickly the current disruption across global energy markets begins to ease."

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