Almost a decade ago, the word ‘unprecedented’ had meaning when we faced life outside of the European Union, following the Brexit vote. Now, there is a certain irony in the number of times we define something as unprecedented. To name a few, Covid-19 pandemic, the Russia Ukraine war, trade related tariffs, the Gaza war and most recently, the conflict in the Middle East.
The conflict in the Middle East and the associated increase in oil prices has created a challenging environment for property investment markets. The UK’s dependence on imported energy makes it particularly sensitive to movements in the oil price and this will filter through to the investment market because of the impact on inflation and interest rate expectations. Repricing and delayed decision-making are the most likely consequences.
CBRE has undertaken analysis of the past 50 years, using the G7 unemployment rate as a proxy for economic cycles, which provides useful context. Geopolitical risks are frequently cited as potential catalysts for economic downturns, yet history suggests these events have typically been sources of short-term volatility rather than primary drivers of the cycle.
We know that unprecedented is no longer the case, and investors are more comfortable operating in uncertain environments and prolonged periods of volatility. That said, the current conflict in the Middle East bears closer monitoring and could represent a near-term headwind, potentially slowing the pace of global economic recovery rather than fundamentally altering its trajectory.
London is a good starting point for a temperature check. It is a principal destination for capital investment and a city with market muscle. From economic dynamism and resilient infrastructure to demographic vibrancy, London’s pull factors cement its safe haven status with investors, and recent transactions support this view.
In the first quarter of 2026, Central London investment volumes totalled £2.7bn across 50 deals, including ten deals over £100m. These larger deals were all hotels and offices, with investors focused on prime, rarely available, assets of scale. Half of the larger deals completed in March, after the outbreak of conflict in the Middle East.
The first quarter saw seven REIT sales, representing a mix of retail and offices. This demonstrates that sellers are taking advantage of improved market conditions and disposing assets in line with broader portfolio and capital‑allocation strategies, while maximising returns. Overseas buyers account for the majority of activity, with capital from Europe, North America, and Asia too.
However, UK investors have a strong foothold on domestic real estate opportunities, accounting for 38% of all office purchases in Q1. This tells us confidence in London is ubiquitous and accommodates a suite of investment strategies, whether that be private equity, institutional or private family offices.
As expected, some transactions have been put on hold as uncertainty prompts pause for thought. But for those that have pressed ahead with plans, pricing has remained disciplined with limited adjustments, reflecting improved liquidity and greater alignment between buyers and sellers.
And when we turn to the UK more broadly, commercial real estate has exhibited resilient performance against the backdrop of geopolitical uncertainty. Returns this quarter have been underpinned by income, which will likely remain the primary driver of performance through the rest of the year.
The best performers will be locations with strong occupational fundamentals. A healthy occupational market is essential to sustain the investment market, and London boasts an unrivalled appeal. The Capital offers businesses a variety of lease structures, access to best-in-class, high-quality assets and the opportunity for owner-occupation. We’ve also seen impressive office-based employment growth in London, with around 30% cumulative growth between 2016-2025, and growth of 8.5% expected between 2026-2030.
London will need to continue to adapt, but it is well positioned to capitalise on growth opportunities, having already proven itself as a highly resilient market that attracts unrivalled cross-border investment, year after year.
Rishi Bhuchar MBE is CEO, UK&I at CBRE
