Eightfold Property presents our latest Property Market Update report. Prepared by our experienced valuation, commercial agency, and residential property divisions, our comprehensive report shares our latest research, analysis, and insights into the factors currently moulding the UK property market to assist you in making informed real estate decisions.
Economic Overview
Economic Update
At its meeting on 18th March 2026, the Monetary Policy Committee (MPC) of the Bank of England voted unanimously to keep the base rate on hold at its prevailing rate of 3.75%. The MPC cited the growing concerns over the surge in energy prices triggered by the Iran/Israel and US conflict, which will be likely to drive inflation in the UK to above 3%. This is well above the Bank of England's target rate of 2%. The Bank also indicated that they may be forced to increase the Rate in forthcoming months if the conflict continues.
The impact of the Base Rate remaining on hold at 3.75% resulted in the pound strengthening against the US dollar, while UK Government borrowing costs increased and the FTSE 100 fell as City investors and traders speculated that the Bank might be forced to increase rates twice during the remainder of 2026 to counteract inflationary pressures. Financial markets anticipate a quarter-point increase to 4% from as early as June.
When commenting on the MPC's decision to retain the Bank Rate at 3.75%, when prior to the Iran war, a Rate cut had been widely predicted, Andrew Bailey, Governor of the Bank of England, commented: "War in the Middle East has pushed up global energy prices. You can already see that at the petrol pump, and if it lasts, it will feed into higher household energy bills later in the year. The best way to tackle this is at source by reopening energy supply lines. We have held interest rates at 3.75% as we assess how events unfold. Whatever happens, our job is to make sure inflation gets back to its 2% target".
Official Bank Rate
Mortgage Rates
During the week commencing 15th March, mortgage brokers reported that the sub 4% mortgage rates in the UK had all but disappeared as major lenders, NatWest, Barclays, Nationwide and Halifax increased their lending rates. The average rate for a two-year fixed rate, 75% loan to value (LTV) mortgage, was reported at 4.99% (w/c 15th March), higher than the previous week at 4.79%, according to 'Uswitch'. The average five-year fixed rate deal, 75% LTV, came in at 5.05%, an increase from 4.94% previously.
The basis of mortgage rate pricing is underpinned by swap rates, which reflect market expectations for central bank rates. Two and five-year swap rates have increased by circa 1% since the Iran War commenced. They currently stand at circa 4% to 4.25%, at their highest level in over a year.
UK Residential Market
Residential Sales Market
The third quarter of 2025 has seen a slower residential market with reduced purchaser demand and lower sales levels. According to a recent report by 'Zoopla' published as at October 2025, nationally, purchaser demand has fallen by 8%, when compared to October 2024, whilst sales decreased by 3%. The slowdown is most pronounced in higher-value areas. Notwithstanding this, nationally there is still house price inflation of +1.3%, although prices within southern England have remained flat overall.
The average house price in the UK now stands at £270,000, as at September 2025, this being £3,560 above September 2024.
As at October 2025, the market is characterised by more houses being available for sale, with 'Zoopla' estimating that available housing stock is up by circa 7% and that the average time to sell a house has increased to 37 days, up by 10% in duration from October 2024. Sales agreed have also reduced by 3%, when compared to October 2024. However, the picture for the UK varies with activity in certain regions remaining strong, with sales agreed in Scotland up by 3% and positive figures of 4% for Yorkshire and Humber, 1% in the South West and 1% in the West Midlands. By contrast, in the South, sales agreed are down by 9% in Wales, 8% in the South East, 6% in the East of England and 5% in London.
Residential Letting Market
According to the ‘Office for National Statistics’, average monthly private rents increased by 5.5% to £1,354 in the 12 months to September 2025, with this annual growth rate being down from 5.7% in the 12 months to August 2025. Average rents increased 5.5% in England to £1,410, by 7.1% to £815 in Wales, 3.4% to £1,004 in Scotland, and 7.1% to £865 in Northern Ireland. In England, private rents annual inflation was highest in the North East at 9.1% and lowest in Yorkshire and Humber at 3.8% in the 12 months to September 2025.
Prime Central London Residential Market
Average prices fell circa 7.8% in Q3 across Prime Central London, although annual sales remain 2.2% higher in the year to Q3 2025 than in Q3 2024. A major factor contributing to the statistic was the larger number of sub £2 million sales, which accounted for 66%. Activity at the higher end of the market remained stagnant, with sales numbers of £10 million plus homes being lower, albeit prices of these homes remained more robust, down only 4.9% year on year.
Prime Central London Residential Letting Market
Prime Central London rents increased by 0.5% in the year to Q3 2025, slowing from 1.4% growth seen in Q2 2025. It is estimated that circa 1,500 homes were let in Q3 2025, an increase of 51.4% on Q2 2025 and up by 2.2% on the previous year. Letting demand has been greatest for smaller and more affordable rental homes, with agents reporting greatest and consistent demand for rental homes of below £1,000 per week. The Autumn increase in activity level has been driven by the usual demand at this time of year from graduates, overseas students and families securing homes for the commencement of the new school year. At the upper end of the market, landlords are experiencing tenants expecting rental discounts. The average discount to homes let at in excess of £2,000 plus per week was -7.2% in Q3 2025.
Retail Market
According to the Office for National Statistics (ONS) the quantity of goods bought (volume) in retail sales is estimated to have increased by 0.9% in Q3 2025 when compared to Q2 2025. The good weather in July and August boosted clothing sales in Q3, whilst non-store retailers showed sustained monthly rises over Q2. Retail sales volumes are estimated to have increased by 0.5% in September 2025, following an increase of 0.6% in August 2025. Computer and telecommunications retailers’ sales volumes grew strongly, alongside continued growth among non-store retailers. It is notable that online jewellers reported a strong demand for gold.
Retail Investment Market
Demand to invest in retail property was 30% higher in Q3 2025 compared to Q3 2024. At the same time, the supply of retail property reduced by 2%. High Street retail investment, which comprises 45% of the market, was, however, slightly down, but remained robust.
Retail Letting Market
Q3 2025 saw occupational demand remaining strong, with notable demand from grocery, value operators, homeware, lifestyle and F and B retailers. Within the strongest centres, lower vacancy levels have supported rental growth.
Looking at retail parks, new development has been muted at circa 1.25 million sq ft over the past 5 years, restricting the increase in space to less than 1%. This factor, combined with increased demand from expanding retailers, has assisted in the impetus of rental growth, with year-on-year growth in retail park rents standing at circa 7% in Q3 2025. Demand has been focused on mid-sized units of circa 7000- 39,000sq ft.
Office Market
National Office Market
Office Investment Market
Q3 saw a more cautious investment market with national office investment across the major nine office centres outside London reaching £262 million, 18% below Q2 and 56% below the 10-year quarterly average. This low level of investment reflects a very muted level of transactions. The largest transaction of the quarter was the acquisition of the Royal Liver Building, Liverpool, for its own occupation at £57million.
Of note, over the 12 months to the close of Q3, overseas investors increased their share of the purchase market to 38% when compared to 28% in the preceding 12 months. UK Institutional purchasers were the second most active of the sectors in terms of volume of investment.
Office Letting Market
Q3 2025 saw a take-up of 1.6m sq ft of offices across the top nine office markets, being ahead of take-up for Q2, but below the 10-year average. Overall, the vacancy rate fell by circa 10%, primarily driven by the reduction in availability of Grade A space, now standing at 2%. This trend is likely to continue with only 694,000 sq ft due for completion in 2026, compared to historic average deliveries of 2.2m sq ft per annum between 2020-2024.
Across the main nine centres of Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle, demand remained focused on best-in-class space with strong sustainability credentials, and Birmingham, Bristol, Cardiff and Leeds all reporting rental growth in Q3. Across the nine centres,the prime average rent reached £40.72 psf, reflecting quarterly growth of 2.1% and annual growth of 5.3%.
Large letting transactions included a letting of 90,362 sq ft of the Welcome Building, Bristol to Hargreaves Lansdowne and a letting of Craftworks, 2 Central Quay, 39 Hydepark Street, Glasgow, of 59,705 sq ft to University of Glasgow. Professional Services, followed by Government Services and then TMT and Creative were the most active sectors in terms of market take-up.
London Office Market
London Investment Market
During Q3 2025, investment volumes in Central London totalled £0.9 billion, taking the 2025 9-month transactional total to £4.5 billion, which was 40% higher than the same period in 2024. Despite this positive result, volumes remained low relative to the 10-year quarterly average of £2.7 billion and represented a 55% decrease in the Q2 volumes. Sectorally, domestic investors accounted for 56% of the total investment market, with overseas investors only accounting for 26%. Major purchases included 100 Regent Street, W1, by the Crown Estate at £95 million and 201 Cavendish Street, London, W1, purchased by Ares for £91million.
London Letting Market
Q3 2025 saw a continued trend of office occupiers focusing demand on high-quality space, providing flexibility, superior ‘green credentials’ and cost-efficient space. The London office market maintained a good pace of momentum, though letting demand slowed when compared to Q2 2025.
Take-up was at circa 2.7m sq ft in Q3, compared to 3.2m sq ft in Q2, with the 10-year average take-up figure standing at 2.4m sq ft.
Prime Grade A Mayfair and St James office rents now stand at £110-£250 psf, whilst prime City rents range from £80-£130 psf. Major office lettings in Q3 included 209,200 sq ft at 40 Bank Street, E14, to HSBC. Also of note was the pre-let of The Gherkin, 30 St Mary Axe, EC3, to BMS Group, of 64,300 sq ft at £84 psf. In the West End, The Elephant, 318 Oxford Street, W1, a letting to General Atlantic of 52,173 sq ft achieved a rent of £165 psf.
Industrial and Logistics Market
Letting Market
Take-up of ‘big box' units over 100.000 sq ft), Grade A space showed a strong performance in Q3 2025, reaching 7.2 million square feet, which is the highest level achieved since Q3 2022 and 52% higher than Q3 2024. However, the figure was 6% below the five-year Q3 average of 7.9 million sq ft. The East Midlands was the most active region, according for 39% of activity, accounting for 39% of activity. Sectorally, the retail sector was the most active, accounting for circa 42% of lettings with large lettings to the major supermarket chains of Marks and Spencer, Tesco and Waitrose. The largest letting in the quarter was Prologs RFI III, Daventry, Northamptonshire, comprising 1,300,000 sq ft, to Marks and Spencer.
Supply of stock is dominated by second-hand space, accounting for 44% of the total, followed by speculative units at 40%, with space under construction accounting for circa 16%.
Prime headline rents across the big box sector in Q3 2025 held, illustrating the resilience of the market in the difficult economic climate.
Hospitality Market
Public Houses
During Q3, after two consecutive quarters of high investment activity, the market slowed with £47.7million transacted. Pub operators reported strong like-for-like sales in the year-to-date Q3 2025, attributing the positive activity, at least in part, to the good spring and summer weather, which helped to offset the difficult economic climate of rising costs. This positively impacted investment, with private high net worth purchasers being the primary source of investment into single asset pubs. Regional pub investment increased year on year as at Q3 2025, resulting from improved investor sentiment, fuelled by reduced base rates. However, overall prime investment yields moved out by 25bps. In Q3, prime London corporate pub yields stood at 4.75%, whilst prime regional corporate pub yields were at 8%.
Hotels
During Q3 2025, £108 billion of hotels transacted. The investment market moved in direction from investment in large portfolios towards a higher proportion of single assets. Prime investment yields remained relatively stable at 5% (vacant possession), whilst prime regional yields were also stable at 7.5% (vacant possession).