UK property investment volume slipped to a two-year low in Q2 – largely due to a lack of large-scale deals, Lambert Smith Hampton’s latest UK Investment Transactions (UKIT) report has found.
In the second quarter there were no transactions above £400 million, the first time this has happened for five years.
The largest deal of Q2 was Unite Students and Manchester Metropolitan University’s £390m JV funding of a 2,600-bed PBSA scheme at the Cambridge Halls site, Manchester.
Lambert Smith said the slowdown reflects tariff concerns, the weak economic outlook and persistently high gilt yields, all of which are adding to investors’ caution.
A modest £8.8bn of property assets changed hands in Q2 2025, 6% down on Q1’s subdued total and the lowest since Q2 2023.
Ezra Nahome, chief executive of Lambert Smith Hampton, said: “The UK market is on a fundamentally sound footing, reflected in ongoing rental growth across most sectors, while pricing in the UK remains relatively attractive in the wider global context.
“The direction of travel for interest rates and finance costs is offering some encouragement for investors, but stubbornly-high gilt yields, elevated uncertainty and a lack of distress are prompting investors to sit on their hands that bit longer.
“That said, there are significant opportunities for those bold enough to act, including in the BTR/SFR sectors, where housing supply shortages, strong rental growth prospects and government planning reforms all support an attractive case for investment.”
Far East and European investors stay away
There’s evidence that foreign investors are staying away from the UK.
Total overseas inflows amounted to only £3.7bn in Q2, the lowest since Q3 2023.
However, North American inflows held up comparatively well in the face of Trump-inspired economic disruption, with total purchasing of £2.2bn. North America represented 60% of total inflows, compared with the five-year average of 49%.
In contrast, inflows from the Far East and Europe were extremely subdued in Q2. Inflows from Asian investors hit a record low of £255m, while purchasing from European investors halved from Q1 to a five-quarter low of £916m.
Roundup
The living sector experienced a solid quarter. Investment rose by 21% quarter-on-quarter to £2.8bn, on the back of increased activity in the PBSA, hotel and healthcare segments. However, this improved volume was still 16% down on the five-year average.
Single family rental (SFR) was a bright spot within an otherwise lacklustre build-to-rent sector. The volume of BTR investment dropped by 10% to £961m, largely to due to an absence of major multifamily deals.
However, the SFR segment accounted for £670m of deals, as investors such as Lloyds Living, Greykite and Packaged Living acquired assets for their growing SFR platforms.
Investor confidence in the office sector continued to show signs of recovery in Q2, with an investment volume of £2.2bn only moderately down on Q1’s five-quarter high.
Offices have accounted for about 25% of overall investment in both Q1 and Q2, a significant rebound after the sector’s share of the market slumped to a record low of 15% in Q4 2024.
The improvement in office investment volume was heavily focused on Central London, which accounted for a substantial 73% of the sector’s Q2 total.
This included two £300m+ deals, namely State Street Global Advisors’ £333m forward purchase of 100 New Bridge Street and Crosstree Real Estate’s £330m acquisition of the Argyll serviced offices portfolio.
Retail was the most resilient of the main sectors against trend in Q2. While the investment volume of £1.6bn was down 11% on Q1, this was only 7% below the five-year quarterly average.
Activity levels were also robust – the number of retail transactions was only 1% below the five-year average, albeit measured against a relatively low base.