Sector outlook
Living sectors redefining UK real estate
Performance expectations across property assets are increasingly fragmented. Capital and demand continue to gravitate towards assets aligned with structural drivers, while others face stronger headwinds linked to cost, regulation and shifting behaviour.
Income stability, supply constraints and long-term relevance are now shaping value more than short-term market cycles. As a result, investors are showing a preference for operational assets that meet clear needs and can scale.
Our respondents expect data centres to attract more investment growth than almost any other asset class, second only to the continued strength in the residential and living sectors. This reflects the fact that demand for digital infrastructure is rising fast.
Sectors anticipated to achieve most investment growth over the next 12 months
Build-to-Rent (BTR) stands out as a solution to ease the UK housing shortage and is ranked by respondents as the strongest value proposition. At the start of 2026, BTR stock was below 150,000 homes and the development pipeline has slowed. 2025 was a significant year for new regulation, introducing the Renters Rights Act and Housing (Scotland) Act, although the Scottish Government U-turn has since excluded BTR from rent controls. Institutional BTR may have paused as both pieces of legislation played out. Viability looks set to slowly improve. The long-term view remains compelling despite lower yields.
The living sectors expected to achieve the best returns over the next three years
AI turbo charging digital infrastructure investment
The energy system in the UK cannot expand fast enough to match the accelerating demand from AI. This is driving the appeal of data centres, despite their complex and capital heavy construction and operation. Digital infrastructure also attracts investment from overseas, which feeds regional expansion. The ongoing convergence of physical assets and infrastructure creates opportunities around smart buildings and EV charging networks. But there are risks. Firstly, technology’s rapid progression means that any investment risks becoming obsolete quickly. Secondly, these projects can be dependent on Government investment to be successful, which can increase the uncertainty further.
Office and retail rank lowest, but not written off
Net growth numbers continue to show offices stuck in negative territory, but shifting closer to neutral sentiment by 10% compared to last year. Supply of space is tight particularly for prime offices, but project starts are trending up with location remaining the key driver of demand.
Investor forecast most investment growth v least investment growth (net difference)
Construction slowed in 2025 across all sectors but retail has been significantly impacted, enduring a 31% decrease in project starts and planning approvals. Yet the picture is nuanced as some prime retail assets and retail parks have performed well. Nevertheless, there may be a positive shift on the horizon. Our research across 2,000 consumers shows spending intentions improving at the margins in early 2026, with some groups beginning to feel greater financial headroom and potentially offering some much needed green shoots for the retail sector.
