UK property investment volumes slumped to a two-year low in Q2 2025, according to Lambert Smith Hampton’s latest UK Investment Transactions (UKIT) report.
In Q2, £8.8bn of assets changed hands, 6% down on Q1’s subdued total. While the Q2 investment volume was 27% below the five-year quarterly average, LSH said the number of deals was only 9% below trend.
No transactions above £400m completed in Q2 for the first time in five years. The largest deal was Unite Students and Manchester Metropolitan University’s £390m JV funding of a 2,600-bed PBSA scheme at the Cambridge Halls site in Manchester.
Living sector investment activity rose by 21% quarter-on-quarter to £2.8bn off the back of increased activity in the PBSA, hotel and healthcare segments. However, this figure was still 16% down on the five-year average.
The office sector continued to show signs of recovery in Q2 with investment volume of £2.2bn only moderately down on Q1’s five-quarter high.
Retail investment activity reached £1.6bn in Q1 – down 11% on Q1, but only 7% below the five-year quarterly average. Retail warehouses recorded investment volume of £731m in Q2 – 9% above the average – and shopping centre investment rebounded to £410m following a sluggish Q1.
Total overseas inflows amounted to £3.7bn in Q2, the lowest level since Q3 2023. North American inflows held up comparatively well in the face of the new tariff regime, but LSH said inflows from the Far East and Europe were extremely subdued in Q2.
Ezra Nahome, CEO of Lambert Smith Hampton, said: “While Q2’s investment volume failed to improve upon Q1’s figure, it provided notes of resilience amid all of the global volatility and uncertainty prompted by the Trump-led administration. The UK market is on a fundamentally sound footing, reflected in ongoing rental growth across most sectors, while pricing in the UK remains relatively attractive in the wider global context.
“The direction of travel for interest rates and finance costs is offering some encouragement for investors, but stubbornly-high gilt yields, elevated uncertainty and a lack of distress are prompting investors to sit on their hands that bit longer. That said, there are significant opportunities for those bold enough to act, including in the BTR/SFR sectors, where housing supply shortages, strong rental growth prospects and government planning reforms all support an attractive case for investment.”
