UK investment market overview: Major portfolio transactions drive investment - Q3 2026

UK industrial and logistics investment totalled £2.76 billion in Q3 2026, up 85% from £1.49bn in Q2. The surge in transactions this quarter principally reflects larger average lot sizes and the completion of several major portfolios. Portfolio transactions contributed approximately £1.41bn, or 51% of total, with the five largest totalling c.£1.21bn.

Consequently, average lot sizes rose to £30.9 million in Q3, up from £24.4 million in the previous quarter. Significant portfolio transactions included a 2.7-million-square-foot portfolio of eight UK logistics assets, acquired by Mirastar & KKR for £398m, the VAULT Portfolio, comprised of eight big box assets, acquired by EQT Real Estate from Logicor for £300m, and Project Pintail, a portfolio of 20 industrial estates, acquired by GoldenTree Asset Management for c.£194m.

A notable feature of activity this year has been the increase in multi-let industrial estate transactions, reflecting investor appetite for opportunities where value can be unlocked through active asset management.

While political, geopolitical and rate uncertainty persists, investors are showing a greater willingness to commit capital rather than delay decisions indefinitely. Ample liquidity and robust occupier market fundamentals are supporting activity, albeit with a disciplined and selective approach to underwriting.

Institutional investors gain market share

Private equity continues to dominate, accounting for 34% of the investment total so far this year.  Meanwhile, institutional investors accounted for 31% of investment activity, the highest proportion since 2021 and a significant increase from just 11% last year.

Focusing on Q3 2026, the market has been dominated by institutions, that have accounted for 40% of investment volumes. Institutions are benefiting from their lower reliance on debt, longer investment horizons and appetite for durable income. The current cost of debt has put them in a relatively competitive position to buyers dependent on financing.

In contrast, the REIT and listed property sector, have become net sellers. REITs and listed property companies are constrained by public market valuations, earnings accretion requirements and balance sheet considerations. With prime logistics yields still relatively tight versus financing costs, making acquisitions work from a listed earnings perspective has been more challenging.

Investors are looking to income to drive performance

With capital value growth continuing to moderate, income is becoming an increasingly important component of total returns. Annual capital growth stood at just 0.7% in the year to August 2026, down from 5.2% a year earlier, increasing the importance of assets that can deliver rental growth and income enhancement. As a result, investors are targeting opportunities for reletting, rental reversion, repositioning or redevelopment.  Activity has consequently shifted towards assets offering greater potential for value creation. Portfolios and multi-let assets, for example, provide a wider range of lease events and therefore more opportunities to capture reversion and crystallise rental growth.

The higher debt costs and weaker capital growth environment is also reinforcing the appeal of long-term income strategies. Institutional investors are particularly well-positioned, given their ability to hold assets over longer periods and focus on sustainable income growth rather than short-term capital appreciation. This has supported demand for high-quality assets with reversionary potential, even as underwriting remains selective.

Pricing and outlook 

Prime industrial yields held broadly stable during Q3, though softening continued in selected segments. Knight Frank's September Yield Guide shows core prime distribution and warehousing pricing unchanged, while secondary distribution and Greater London estate yields moved out by up to 25 bps, reflecting continued differentiation between prime and secondary assets.

However, financing markets came under renewed pressure as the quarter progressed. The five-year SONIA swap rate rose to 4.74% in early October, up from 4.03% at the end of Q2, while ten-year gilt yields increased to 5.42%, from 4.76% at the end of Q2.

Looking ahead, rate expectations have shifted decisively upward. Market pricing on 12 October implies the Bank of England base rate rising from 3.75% to around 4.5% by April 2027 and 4.9% by October 2027, peaking near 5.0% in early 2028. Meanwhile, economists at Oxford Economics and Capital Economics are forecasting just two rate rises, taking rates to 4.25% in the first half of next year.

Despite this more challenging rate backdrop, resilient occupier market performance and continued upward revisions to rental growth forecasts should help offset some of the pricing pressure. Nonetheless, elevated and rising debt costs are likely to keep underwriting selective and sustain pressure on exit pricing over the near term.