"The uncertainty from the fallout of the war with Iran may have given both businesses and investors a reason to pause for thought"
- Andy Miles - Rightmove
Three of the four main commercial property sectors recorded year-on-year declines in both leasing and investment demand in Q1 2026, with speculation over interest rate hikes following the outbreak of the war in Iran weighing on activity.
Rightmove's Commercial Insights Tracker for Q1 2026 shows the office sector saw leasing demand fall 3% and investment demand drop 9% year on year. Leisure recorded steeper falls of 11% and 14% respectively, while retail saw declines of 9% in leasing and 2% in investment.
The industrial and logistics (I&L) sector was the clear exception, with leasing up 6% and investment up 13%, extending what has become the standout growth story in commercial real estate in recent years.
Big-box logistics performed particularly strongly. "In terms of leasing for sheds across the UK over 100,000 sq ft (big box), Q1 2026 take-up totalled 7.6 million sq ft, which is 11% higher than the same quarter last year," said Lewis Rapley, logistics research associate, commercial research, at Savills.
"It was also 16% higher than Q4 2025, which showed momentum continued into the new year. While the full impact of the war in Iran is still too early to tell, it is encouraging to see demand and viewings/enquiries remain robust."
Vincent Scammell, director of sales and operations at BizSpace, a flexible workspace provider for SMEs, pointed to a structural shift driving that resilience. "Despite a more uncertain geopolitical backdrop weighing on some sectors, demand for industrial space continues to grow," he said. "This reflects a longer-term shift, with SMEs prioritising operational resilience, supply chain flexibility and access to well-located space over long-term fixed commitments."
Scammell also flagged rising activity from defence-related occupiers. "We are also seeing rising demand from defence-adjacent sectors, particularly across heavy manufacturing, technology and R&D supply chains, supported by increased government defence spending across Europe. With urgency high, existing stock remains the only scalable solution."
The quarterly declines elsewhere need context. The drops in offices, retail and leisure all come off the back of strong 2025 figures, and overall commercial property investment demand, though down 5% year on year, remains 10% above where it was two years ago.
Offices illustrate the point clearly. The 9% fall in investment demand follows a record rise at the same point in 2025, and the sector still sits 53% above its two-year comparable. Leisure and hospitality tell a similar story, with both sectors ahead of the equivalent period two years ago despite this quarter's softening.
"The uncertainty from the fallout of the war with Iran may have given both businesses and investors a reason to pause for thought," said Andy Miles, managing director, commercial, at Rightmove. "At a time when many analysts are predicting two or even three increases to the Bank of England's base rate this year, decision-making becomes difficult."
Broader operational real estate sectors held up well, according to Christie & Co. "Activity across our specialist operational real estate sectors was resilient in the first quarter of this year, supported by continued demand for businesses with strong fundamentals and sustainable underlying income," said Darren Bond, global managing director at Christie & Co.
"While decision‑making is being shaped by interest rate expectations and cost pressures, well‑priced opportunities continue to be attractive, particularly where businesses are well run, and performance is clearly evidenced. As we move further through the year, realism on pricing and clarity around business sustainability will remain key to maintaining momentum across these markets."
