[UK] Unwrapping 2026: a sleigh full of opportunities?

For retail, 2026 looks like being a mixed bag. Whilst there have been some notable retail transactions in 2025, these have focussed at the top end of the market. The business rates revaluation will provide a boost for smaller high street whilst increasing rates for large warehouses which could feed into higher online prices. Gradually falling inflation and potential interest rate cuts would provide a fillip to consumer confidence and increased spending which would support a steady market improvement. The current contrast between prime stock (well located, modernised and often multi-use) and weaker retail assets (secondary, requiring further investment) is likely to persist and perpetuate the two-speed market with investment focussing on the former especially with high construction costs likely to continue.                          

There will be continued focus on construction contracting models and pricing strategies, with the best-prepared clients being proactive in setting the agenda rather than reacting to tender returns. 

Risk appetite remains impacted by market conditions, increasing regulation and evolving processes and construction methods. In the UK, developers bringing forward HRBs will look forward to seeing the BSR continue to speed-up decision making, but there is still some way to go, and risks of delay or additional requirements need consideration at an early stage. Any project deploying technology that is new or scaled for the first time can't duck and needs to tackle head-on challenges around specialist suppliers, coordination, integration and whole performance. Across all sectors, fine tuning is increasingly required to get the right balance between risk allocation and efficiency in procurement. Management methods are more and more under consideration for projects or particular scopes of work (with FIDIC's EPCM contract still anticipated), and hybrid pricing is on the uptick (with the JCT bringing out its first target cost contract for the UK real estate sector). 

Clients will need all their advisers to truly understand a range of increasingly sophisticated models. As legal advisers we keep our fingers on the pulse through routine involvement in setting strategies from the start and sitting at the negotiating table in real-time, across the full spectrum of the built environment.

2026 will be a pivotal year for infrastructure planning in the UK, driven by the imminent implementation of the Planning and Infrastructure Bill. Expected to receive Royal Assent by the end of 2025, the Bill will introduce wide-ranging reforms aimed at accelerating the delivery of major infrastructure while supporting the Government's ambitions for economic growth and energy security. Key changes include streamlining the consenting process for Nationally Significant Infrastructure Projects, such as removing the statutory requirement for pre-application consultation, and scrapping the paper permission stage for judicial reviews.

Energy infrastructure will likely continue to dominate the agenda in 2026. NESO’s grid connection reforms have already had significant implications for the market, and further change is expected as Ofgem develops a new regime for transmission and distribution network operators aimed at slashing delays. Decisions are due next year on a wide range of major energy projects, including offshore wind, solar and grid upgrades.

2026 looks set to be fast-paced and transformative for infrastructure planning. To stay up to date with the latest developments, sign up to our Energy and Infrastructure Consenting Notes blog: Energy and Infrastructure Consenting Notes | Herbert Smith Freehills Kramer | Global law firm

As we predicted last year the office market has started to return – mainly in London, but we have also seen some activity in the other large centres for the best buildings. In London we are beginning to see the early stages of a return to 'normal' for the office sector with a flurry of transactions announced in Q4 and I expect that to continue through 2026. Businesses have returned to the workplace – I wouldn't say people are returning anymore; they are back – and occupancy data is strengthening quarter on quarter. Rental growth continues in London and so as well as there being a return to trading of existing stock, and not just 'dark green' buildings, I am hopeful that we will see people bring forward new ground up development, underpinned by the strong rental growth, shortage of supply and improving interest rate environment.

We expect to see strong interest and activity across the Living sector for another year, which with logistics, has driven the market for a number of years now. 2026 should start to see improvements at the Building Safety Regulator which will be welcome across the industry and we hope to see the positive effects of this flowing into new approvals, the progression of stalled projects, and remediation of existing stock. Given population dynamics and the lack of state funding we expect to see continued interest in later living and retirement communities – it will be interesting to see if more investors, developers and operators can settle on a workable model. Notwithstanding the reduction in rates that we are expecting we anticipate seeing more activity in the single family housing space – volume housebuilders, especially those that are listed, will remain under pressure to report successful delivery targets and the challenges of saving for a deposit and meeting affordability criteria will remain difficult for many, driving growth and investment into this space.

Interest rates reducing slowly and returning to a more manageable level, point to increased investment activity across all sectors in 2026 which will be welcome for the industry. The counter balance will be the macro picture where we continue to see a heightened level of macro instability which is sadly starting to become the norm for us all.