2026 UK Property Forecasts: What Savills and Knight Frank are Predicting

As the year draws to a close, the UK commercial property market is shedding the uncertainty that shadowed much of 2025. This past week has seen a significant shift in tone, moving from the “wait-and-see” caution post-Budget to a proactive, forward-looking outlook for 2026.

Here is an overview of the key trends and news shaping the commercial landscape this week.

1. Planning Reform: The "Christmas Surge"

The biggest news of the week comes from the Ministry of Housing, Communities, and Local Government. In a major move to kickstart the 2026 development cycle, Housing Secretary Steve Reed has unveiled a "significant rewrite" of the National Planning Policy Framework (NPPF).

The core of this strategy is a default “yes” for building around rail stations and a push for higher-density, “upward” urban developments. For commercial developers, the introduction of a new "medium site" category (10–49 units) is a game-changer, offering streamlined rules and potential exemptions from the Building Safety Levy. These measures aim to provide the "planning certainty" that has been sorely missing, signaling a massive push toward the 1.5 million homes target which will inevitably ripple into mixed-use and retail infrastructure.

2. Forecasts: Income-Led Returns and Market Stability

Market heavyweights Savills and Knight Frank have released updated forecasts this week, suggesting that the "trough" of the cycle is behind us. Savills has revised its UK real estate return forecast for 2026–2030 to an annual average of 7.8%.

Crucially, the nature of these returns is shifting. While capital growth remains modest, returns are increasingly "income-led." With interest rate pressures beginning to ease, investors are refocusing on high-yielding assets. Shopping centres and industrial hubs—particularly those in dominant regional locations—are predicted to outperform, as limited supply keeps rental growth resilient.

3. Sector Highlights: Offices and Alternatives Outperform

• The Office Rebound: Contrary to early-year gloom, prime office space is seeing a resurgence. This week saw major movements in London, including Deutsche Bank's move to Canary Wharf and a significant £152m funding boost for housing and infrastructure upgrades in the City of London. High-quality, ESG-compliant "Grade A" offices remain the gold standard, with occupier demand concentrating on sustainable buildings ahead of the 2027 EPC rating changes.

• Logistics & Data Centres: The "gold rush" for powered land continues. Data centre take-up is on track to hit record highs by year-end, while the logistics sector remains a fortress of stability. Notable deals this week include the £30m acquisition of industrial space in Wolverhampton and a flurry of "big box" activity near major hubs like Heathrow.

• Retail’s "Festive Frenzy": Investor confidence in retail is bouncing back, with nearly £900m spent on shopping centres in an end-of-year rush. The trend suggests that investors see value in the high street again, provided the assets offer strong income returns.

4. BPF & Policy: The Drive for Viability

The British Property Federation (BPF) has been vocal this week regarding development viability. While they have welcomed the government’s move to remove certain policy costs from electricity bills—which supports the electrification of the sector—they continue to push for more clarity on Business Rates and Land Value Capture. The industry's message is clear: while planning reforms are a great start, the financial viability of projects must be protected to ensure the proposed "surge" in building actually materializes.

Market Insight Commentary

As we look toward 2026, the theme is Resilience Through Reform. The UK commercial market is transitioning from a period of high-interest-rate survival to a phase of strategic growth.

For owners and investors, the strategy for the new year should be twofold: asset management and sustainability. With returns being driven by income rather than speculative capital jumps, the quality of the tenant experience and the energy efficiency of the building are no longer optional—they are the primary drivers of value.

The government’s "default yes" on urban development offers a rare window of opportunity for those ready to move quickly. While the residential sector often steals the headlines, the supporting commercial infrastructure—from "last-mile" logistics to urban mixed-use hubs—is where the real market momentum is building.