Quarterly Review: Q2, 2026
While the global economy has so far weathered the energy shock resulting from the Iran conflict, the prolonged closure of the Strait of Hormuz increases the downside risk to our forecasts. Under our baseline, we still expect global inflation to only rise temporarily with minimal impact on GDP growth. Under our adverse scenario, a continued disruption to energy supply could push the global economy into
recession.
Central London office take-up ticked up in the second quarter, along with space under offer. That led to a further fall in office availability in the capital and a drop in vacancy rates from 8.5% to just 8.0%, the lowest since 2021.
Coming off two strong quarters, UK investment volumes disappointed in Q2. That was partly driven by a drop back in London office transactions below £2.0bn, a 17% q/q fall. Despite weaker transaction totals, London still saw five large-scale deals above £100m in Q2.
Regional office activity softened in Q2, with only around 1.2m sq. ft. taken up across the Big Five
markets and the South East. That said, for prime office space the evidence from under offers suggests occupier demand remains robust. A limited pipeline will continue to put upward pressure on prime office rents.
Regional investment trends mirrored the Capital. After a record Q1 for regional offices outside the South East, investment volumes fell 33% on the quarter. Meanwhile, South East office volumes saw little movement, remaining at just £0.2bn. Despite 8% q/q growth in Q2, industrial investment volumes remained well below historical norms. The only sector to show strong growth was retail, where investment rebounded 39% on the quarter, driven by a bumper 76% rise in shopping centre volumes.