Investors are increasingly exploring commercial property investment as an alternative to residential assets, according to NAEA Commercial Propertymark's Advisory Panel, which has been reflecting on market conditions so far in 2026.
Panel members report that rising tax, regulatory and compliance obligations affecting residential landlords are prompting some investors to reassess their portfolios and consider commercial assets, where the legislative framework is often seen as less restrictive.
Commercial property brings its own challenges, including higher entry costs and more complex transactions, but advisers say enquiries are increasing from investors looking to diversify away from residential investment.
Michael Sears, member of the NAEA Commercial Propertymark Advisory Panel, said interest is building among investors drawn to commercial property's lighter regulatory touch.
"Interest seems to be building from investors wanting to invest in commercial property over residential, mainly because there is less of a legislative stranglehold," he said.
"Investors tend to often be those converting their residential portfolios to commercial, as the entry barrier financially to commercial is generally higher, with lower loan-to-value lending typically available."
Sears said the retail sector across Kent continues to perform strongly. Healthy demand is meeting an ongoing shortage of available stock, he explained, meaning properties are being let or sold within relatively short timescales.
Industrial and warehousing space remains equally buoyant, with tenants matched to properties quickly
Large open-plan offices continue to struggle, though supply and demand both remain low
Small offices in business centres continue to perform well
Commercial agents report a broader rise in enquiries from investors considering commercial assets. Propertymark's most recent Commercial Outlook Report, covering the first quarter of 2026, found that investment yields in the leisure and land and yards sectors rose between the fourth quarter of 2025 and the first quarter of 2026.
Steve Lane, member of the NAEA Commercial Propertymark Commercial Advisory Panel, said demand from larger national retailers remains subdued, though some independent operators continue to drive retail market activity.
"At present in the retail arena, demand from the large multiples for the larger units remains subdued whereas, in contrast, some independent operators remain active," he said.
Lane noted that rising rateable values and employment costs have weighed on business confidence, though many occupiers continue to commit to commercial premises despite the pressures.
The industrial sector remains resilient, he added, while the office sector overall stays muted, with more activity for letting smaller offices and suites. He also pointed to a shift in investor behaviour taking shape across the market.
"An interesting market trend is that we are seeing fresh investors seeking more in-depth advice where they are considering pivoting and perhaps investing in commercial property rather than residential property due to the changes in the private rental sector," Lane said.
"Many of these investors need guidance on the differences between the tax and regulatory structures of the two markets. This includes borrowing ratios, tax liabilities, and regulatory obligations."
Encouraging demand also remains from owner-occupier businesses looking to buy their own freehold commercial premises rather than continue leasing, according to Lane. Access to finance, however, remains a significant obstacle for this group.
"The challenge is that although owner-occupier buyers have a genuine appetite to purchase, they are experiencing much more cautious lending than they would often expect," he said.
