Colliers forecasts average annual total returns of 7% over five years, with retail expected to outperform
A recent Colliers’ report has revealed that UK commercial real estate total returns are forecast to reach 4.4% in 2026 before strengthening to 6.3% in 2027 and 8.2% in 2028. Over the five years to 2030, total returns are forecast to average 7% per annum
According to the latest Q3 UK Real Estate Investment Forecasts report, the 2026 total return forecast has been revised down from 5%, reflecting higher gilt yields and increased uncertainty. Colliers expects all-property capital values to decline by 0.3% in 2026 before returning to growth of 1.6% in 2027, with limited property yield movement expected over the next few years.
UK commercial real estate investment volumes increased from £10 billion in Q2 to around £11 billion in Q3. While this was ahead of Q3 2025, volumes remained 13% below the five-year quarterly average. Year-to-date investment reached £31 billion, marginally below the corresponding 2025 figure.
Oliver Kolodseike, Head of Research & Strategic Insights at Colliers, commented:
“Higher gilt yields and borrowing costs continue to create a challenging investment environment, limiting the potential for significant capital growth in the near term. However, occupational fundamentals remain resilient across parts of the market and we expect returns to strengthen from 2027.
“With limited scope for yield compression, income and rental growth will be increasingly important drivers of performance. Retail continues to stand out, while demand for high-quality office and industrial space is supporting rental growth in those parts of the market.”
Looking into specific sectors, retail is expected to lead performance over the next five years, with total returns forecast to average 8.5% per annum between 2026 and 2030, compared with 7% for all property. Shopping centres are forecast to generate the strongest returns at more than 10% per annum, while retail warehouses are expected to return around 8.9%.
The outlook for offices and industrial remains more polarised, with demand continuing to favour higher-quality assets. Both sectors are forecast to deliver average total returns of 6.6% per annum over the five years to 2030. Industrial is expected to deliver the strongest mainstream-sector rental growth over the period, averaging 3.3% per annum.
Overall, the report points to a market where income resilience, rental growth and asset quality will be increasingly important to performance as higher financing costs limit the scope for significant yield compression in the near term.
Access the full Q3 UK Real Estate Investment Forecasts report here.
