Leading Indicators | A shift towards stability: UK property returns and pension fund reallocation

Total returns have recovered and stabilised across UK CRE sectors

UK commercial real estate returns have steadied, marking a clear shift from the volatility seen since mid-2023. The latest MSCI UK Monthly Index shows total returns are broadly consistent across sectors. As of September 2025, the All Property annualised total return stood at +8.46%, led by Retail +10.30% and Industrial +10.09%, followed by Residential +9.01%, Hotels +7.03%, and Offices +3.88%. The market now appears to be in a more stable phase, with returns primarily driven by income.

Market volatility rises to its highest since April  

Renewed concerns over US regional banks briefly pushed the VIX (the market’s ‘fear gauge’) to 28.9, its highest level in six months. While volatility has since moderated, ongoing uncertainty may gradually shift investor focus toward UK markets, which could benefit from relatively steadier sentiment and a potential reallocation of capital away from US risk exposure.

Pension funds commit £3bn to UK assets

Around £3 billion of new pension capital is being directed into UK rental housing, infrastructure, and high-growth companies - including AustralianSuper’s £500 million pledge to residential projects such as student and build-to-rent housing. This aligns with the new Sterling 20 initiative, which reflects growing collaboration among UK pension funds to deploy long-term capital into domestic assets. Knight Frank are currently monitoring these developments, please reach out if you’d like to hear more.