It has been an interesting, if not overly eventful year for the commercial property market – and this is a positive. The optimism that replaced the early uncertainty remains, but sluggishness has tempered growth. Nevertheless, there are opportunities for investors to target in 2026.

Polarisation has been a key commercial property market theme in 2025, as sector development has been uneven, with fragmentation occurring within core areas. This has fed into a more pronounced trend for flight to quality taking hold across the market. Underpinning this behaviour has been ongoing economic uncertainty, which has continued to impact sentiment and spending, even if interest rate cuts have been a fillip.

What have been the standout sectors in 2025?

Industrial and logistics has been the standout performer in 2025 – the engine room of market growth, although the sector has seen rising maturity during the year. The flight-to-quality trend has been visible in heightened demand for well-located, higher-quality units as businesses have targeted operation optimisation and looked to future proof supply chains.

Residential has been another key pillar, with interest rate cuts having a positive impact here, as has the government’s focus on trying to increase housebuilding. A notable trend in this space has been semi-commercial development, with a growing number of mix-use residential and retail projects, including on beleaguered high streets.

What were the key trends in the retail and office spaces in 2025?

On the whole, retail has had a decent year, despite continued consumer caution, showing clear signs of recovery compared to 2024. Prime property has been a key driver, most notably in relation to shopping centres, with limited supply important here. Warehousing, including last-mile assets, has also had a positive impact.

As with the other top tier sectors, performance in the office space has been uneven, with flight to quality again clearly visible. While demand has improved for prime, modern and well-located offices (most notable in Central London and the South East, as well as in other major cities), secondary office assets have struggled.

What alternative property sector made a big impact in 2025?

Outside of the traditional property sector, alternative spaces have had a good year, contributing some much needed growth despite their smaller size. Standout markets have included data centres, with investment focused on geographic areas with significant power capacity and established ecosystems.

Purpose-built student accommodation has also been reliable in the alternative space, with a chronic supply shortage underpinning performance, and helping to offset concerns around affordability and a decline in construction activity. Again, the focus has been on quality and more popular universities.

Final verdict for 2025 and what to target in 2026

Overall, if performance hasn’t perhaps lived fully up to expectations, movement has been positive in many ways and the market is ending the year, it feels, in a more a stable space. Looking ahead, market polarisation is set to continue, meaning it is important that investors have the capacity and dynamism to develop deals based on key trends and growth spots.

Against this backdrop, with unevenness continuing to be a core market development trend, accessing finance will remain critical to taking commercial property investment opportunities in 2026. Notably, with traditional lenders still cautious, the role of alternative finance looks set to grow larger as investors are attracted by its accessibility, flexibility and affordability. In such an environment, the choice of commercial loan and mortgage provider is essential.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.