Overseas investment into UK commercial property slowed to £9.7bn in Q1 2026, almost 40% below the five-year Q1 average, according to the latest annual report from Real Estate:UK and CoStar Group.

Overseas capital accounted for £3.6bn of investment in Q1, with inflows from the US falling significantly following a record year in 2025.

The slowdown came amid economic and geopolitical uncertainty, a weaker US dollar and continuing concerns about the viability of deploying capital into UK development and asset upgrades.

The report said the slowdown suggests the weaker dollar may already be affecting the relative attractiveness of UK assets for overseas buyers, with elevated financing costs and wider global uncertainty also contributing to a more cautious investment environment.

Offices were a relative bright spot in Q1, attracting £2.9bn of investment and accounting for 30% of total volumes, with activity concentrated in London and a small number of major regional cities, the report found.

By contrast, industrial investment recorded its weakest quarterly performance in nearly six years, while retail activity remained subdued.

The subdued first quarter follows a strong 2025, with foreign inflows rising 33% year-on-year to £27.2bn, the fourth strongest year on record, and accounting for a record 56% share of all UK commercial property investment activity.

US players were the largest overseas investor in UK property last year, deploying £18.2bn, driven partly by major healthcare acquisitions, including Welltower’s multi-billion-pound purchases of care home portfolios from Barchester Healthcare and HC-One.

Even excluding those landmark deals, the report said US capital had dominated overseas investment into UK real estate last year, supported by favourable currency conditions and demand for stable, long-term, income-producing assets.

European capital also became more active during 2025, with French investors deploying more than £1bn into UK real estate, driven largely by funds targeting diversified regional assets.

Norwegian and Swedish investors focused on large strategic deals, including mixed-use London estates, hotels and logistics. Japanese investors were increasingly active towards the end of the period, particularly in London and the South East.

Melanie Leech, interim chief executive of Real Estate:UK, said: “The strong performance in 2025 demonstrated continued confidence in UK real estate, particularly in sectors such as healthcare, rental housing and operational assets.

“However, the significantly weaker start to 2026 highlights how sensitive international capital flows are to changes in the wider economic and geopolitical environment. Sterling’s appreciation against the dollar may also be eroding some of the pricing advantage that helped drive exceptionally strong US investment into UK real estate during 2025.”