Quarterly Review: Q1, 2026
The onset of conflict in Iran has greatly increased uncertainty about the global economic outlook.
A relatively short conflict will push global inflation temporarily higher and trim GDP growth, but the fallout would be manageable. A more prolonged disruption to energy supplies risks a much larger hit to activity, potentially a global recession, and would prompt a much broader monetary tightening cycle.
Central London office take-up dipped below its 10-year quarterly average at the start of the year, though under-offers hint to an upturn in Q2. Weak demand did not prevent another fall in office availability, while vacancy dropped to 8.5%, a 4-year low in Q1.
After a record end to last year, UK investment volumes disappointed in early 2026. Within this, London office transactions were roughly flat on the quarter at £2.3bn, a stark contrast to weakness in most sub-sectors and, aside from Q4 2025, the best outturn since 2023.
Regional office take-up made a solid start to the year, supported by larger deals. Occupier demand is focused on prime, which continues to squeeze Grade A availability and has led to strong rental growth in some cities. Meanwhile, Q1 was the weakest quarter for South East office leasing in 3 years. And rising overall availability meant vacancy increased as well.
Outside of London investment trends were very mixed. After a surge at the end of last year, South East offices saw investment volumes collapse in Q1, while regional office purchases rebounded albeit from a low base. In a weak overall industrial showing, regional multi-lets held up. And shopping centre transactions were dominated by a regional deal in Dudley.