Savills predicts a more stable UK real estate market

Savills has increased its UK real estate total return forecast for 2026-2030 to 7.8% annually, up from 7.4% in its 2025 outlook, citing a more stable UK market. 

UK - Savills

The international real estate advisor highlights the growing importance of income in driving returns, partly due to an expected slowdown in interest rate tightening.
Shopping centres and regional buy-to-let residential properties (particularly in Yorkshire & Humber) are identified as top investment picks for the next five years. Shopping centres are expected to see income-driven returns from strong rental growth in dominant locations, while northern buy-to-let residential will offer a mix of capital value growth and income. Overall, 13 UK property sub-sectors are projected to achieve annual returns exceeding 8% between 2026 and 2030.
Savills anticipates that challenging development viability will lead to a shortage of prime assets and sustained high rental growth in most commercial property locations. Commercial property investment volumes are expected to rise by 10% to approximately £55 bn (€65 bn) in 2026, up from £50 bn (€59 bn) in 2025, as the UK market is increasingly recognised as being in a strong position compared to international peers. Offices remain a favoured commercial pick due to stable demand, limited new supply, and strong rental growth. Retail is also seen in a growth phase, with low vacancy rates in dominant areas and defensive characteristics, while demand for data centre space continues to be robust.
For the residential sector, Savills has slightly downgraded its mainstream house price forecast for 2026 to 2%, but expects a brighter medium-term outlook, particularly in northern, Scottish, and Welsh markets. Stronger price growth and sales activity from 2027 should boost housebuilder and housing association activity in the land market. In institutionally-led living sectors, the BTR pipeline is set to recover, and investors will focus on existing multifamily units for stable income. Student accommodation investors will need to be highly selective in location underwriting and operating partners.
Richard Rees, managing director, Savills UK, commented: “Overall, we are forecasting a slightly more muted recovery in UK real estate investment markets over the next five years than we have seen emerge from previous downturns, but there still should be a steady improvement in both volumes and values across 2026. The story on interest rates is encouraging: expectations point to a 50-basis-point reduction, bringing rates closer to 3%. This shift, combined with narrowing bid-ask spreads and greater realism among vendors, suggests a market ready for more activity. Residual pent-up demand in residential remains, rural property continues to attract strong interest, and scarcity in prime offices, retail, and industrial space is driving rental growth. The total returns on offer will be broadly in line with the long-run average, and this should ensure that property remains a key part of many investors’ portfolios.”