Prime pricing holds firm
Volumes soften amid geopolitical uncertainty
Regional office investment volumes reached £1.05 billion in H1 2026, representing a 7% decrease compared with H1 2025 and 53% below the five-year average for the period. Uncertainty arising from the US-Iran conflict slowed the momentum that had been building at the start of the year, with Q2 2026 volumes particularly subdued relative to historical levels.
There were four transactions above £50 million in the first half of 2026, which was in line with each of the previous three first-half periods. The largest transaction was BNY's acquisition of its regional headquarters at 4 Angel Square, Manchester, for £114 million, reflecting a yield of 6.86%. The building comprises 200,000 sq ft and represented the largest office investment transaction across the Big Six regional cities over the past two years.
The prime regional office yield remained at 6.75% following a 25-basis-point outward shift in May, primarily driven by the increase in UK 10-year gilt yields amid heightened geopolitical uncertainty.
Positively, the Bank of England revised its CPI inflation forecasts downwards in June compared with April, while the base rate has been held at 3.75% across the last five meetings. Together, these factors should help limit further outward yield pressure.
Prime pricing was tested during H1 2026 by the sale of The Lincoln, Manchester. The 110,000 sq ft building, completed in 2021, was acquired by Northtree Investment Management for £55 million, reflecting a yield of 6.80%.
Large lots set to spike volumes
A recurring theme in recent years has been the lack of large prime assets trading across the market, which has suppressed overall investment volumes. However, there has been a notable uptick in the number of assets above the £50 million threshold that are either being marketed or are currently under offer. There are currently 14 assets that are under offer, available for sale, or set to be launched in the second half of 2026. If all of these assets transact, it would more than double the average volume of £50 million-plus deals completed over the last three years, reflecting the improving sentiment evident across the sector.
These transactions are expected to provide a significant boost to investment activity, with the assets potentially expected to be sold for a combined total of £1.3 billion. Over the last decade, assets traded at more than £50 million have accounted for approximately 50% of total office investment volumes, underlining the importance of this lot size to overall market turnover.
Office investment activity has been heavily concentrated in the Big Six regional cities during H1 2026. Transactions in these markets accounted for 60% of all regional office investment activity, the highest proportion ever recorded, highlighting the current investor preference for the most liquid regional markets.
In contrast, activity in Greater London and the South East has been subdued. Investment volumes totalled just £160 million in H1 2026, representing a 63% decline compared with H1 2025. This trend may persist in the near term given the number of sizeable assets currently being marketed in the Big Six cities. Notable examples include 3 Hardman Street and Havelock in Manchester, which are being marketed at £110 million and £59.5 million respectively. Furthermore, 2 Snowhill in Birmingham traded in July, with the 310,000 sq ft office building selling for £62 million. This represented Birmingham's largest office investment transaction for three years.
The return of core capital?
The reduction in investment activity from UK institutional investors has been notable in recent years, driven by pension funds reducing property allocations, rising gilt yields and weaker sentiment towards the office sector. Since the start of 2024, this buyer group has accounted for just 5% of regional office investment volumes. In comparison, UK institutions represented around 25% of investment activity between 2010 and 2023, highlighting the scale of the retrenchment.
Improving confidence around exit pricing is increasing conviction in business plans and supporting underwriting assumptions.
Simon Preece, Director, Commercial Research
There are, however, signs that more core capital is beginning to target the regional office market. This is evidenced by the activity of Local Government Pension Scheme (LGPS) pools. Previously organised across 90 funds, these schemes have been consolidated into six larger pools to increase scale and investment capacity. Savills is aware of several LGPS-backed investors actively bidding on assets currently being marketed for sale. While this has yet to translate into acquisitions from these vehicles, they are expected to become more active buyers during the second half of the year.
The presence of core capital, including LGPS investors and certain overseas buyers, should help stimulate activity from core-plus and value-add investors. Improving confidence around exit pricing is increasing conviction in business plans and supporting underwriting assumptions. Looking ahead, this trend is expected to contribute to higher investment volumes in 2026, extending the recovery trajectory that has been evident over the past two years.
To further discuss the latest insights, please contact the Commercial Research team via the Authors panel.
Search for a commercial property