UK Commercial Property Outlook: Stable yields mean steady returns

Property yields saw no movement in 2025 and we expect that stability to continue over the next few years. We think the 10-year gilt yield will see a small fall to around 4.25% by the end of 2026, but the current narrow spread against property yields argues against any yield compression. Meanwhile, a weak economic outlook means all-property rental growth will slow from 3.6% y/y in 2025 to 2.9% y/y in 2026 and 2.1% in 2027, before seeing a gradual recovery. Total returns of 7.4% p.a. over 2026-30 are therefore solid, if not spectacular. A continued lack of new supply means residential will do the best of the major sectors, with offices once again lagging as occupier demand takes a hit from the adoption of AI.       

We’re exploring the outlook for UK residential and commercial property in roundtables in London on Wednesday 18th March. Register here to join the discussion.