Prime Rents Are Still Rising While Property Values Flatline — Here Is Why

The headline numbers from commercial property in the first half of 2026 seem contradictory. Prime rents — the rents being agreed on new lettings in the best locations with the best specification — rose by approximately 3.2% over the year. Capital values across all commercial property grew by just 0.1% in nominal terms.

Rents going up while prices stay flat is unusual. Understanding why it is happening matters if you are looking for commercial space, because it shapes where the market is going and what you should be negotiating for.

The Mechanics: Why Income Can Rise While Capital Values Do Not

Commercial property values are calculated by dividing net rental income by a capitalisation yield. If rents go up by 3% but the yield also rises (meaning investors require more return per pound of income), the two effects can cancel each other out:

• Higher rent × lower yield multiplier = flat or modest capital growth
• Example: £50,000 rent at a 5% yield = £1,000,000 value. Same rent growing to £51,500 at a 5.3% yield = £972,000 — a capital value fall despite higher income.

This is the 2026 market in summary. Income is growing in the prime sector. But the discount rate investors apply to that income has moved out — driven by gilt yields at 5.39%, higher financing costs, and broader uncertainty. The result is a market where rents rise and prices barely move.

Where Prime Rents Are Growing

The 3.2% annual prime rent figure masks significant sectoral variation:

Logistics and industrial (prime). Last-mile distribution, modern big-box logistics, and urban industrial near population centres continue to see tight supply and strong occupier demand. Rents in prime South East logistics locations have grown faster than the average — in some sub-markets, 5–7% year-on-year.

Grade A offices. Businesses that require staff attendance are competing for a small pool of well-specified, well-located office buildings with strong ESG credentials and good commuting links. Bristol, Manchester, Edinburgh, and parts of central London are seeing sustained prime office rental growth. Obsolete stock is a different market entirely.

Foodstore-anchored retail. Well-located convenience retail anchored by a major grocer has held income well. The rental recovery in this part of the retail market has outperformed expectations.

Secondary and older stock. Older offices requiring significant EPC upgrade, secondary retail pitches, and industrial units with poor yard specification are flat or falling in rental terms in many markets.

The EPC Effect

The Energy Performance Certificate minimum standard for commercial lettings is creating a structural divide in the market. Landlords with sub-standard assets face two choices: invest in improvement or lose the ability to let legally. Many smaller private landlords are choosing to sell rather than invest — which adds supply to a market where demand from investors in that asset class is weak.

For occupiers, this means some units are available at prices that reflect the cost discount of poor EPC ratings — but those same units may face restrictions on lettability in future, and energy costs will be higher. Buildings upgraded to B or C standard are in shorter supply and command a premium.

The Pre-letting Market

Where new development is occurring, a significant proportion is being pre-let — agreed before construction completes — because speculative development finance is difficult to source at current rates. Pre-letting allows developers to secure income before completion, which makes the financing viable.

If you have requirements for new or purpose-built space in the next 12–24 months, engaging with the pre-letting market now may be the most efficient route. Pre-letting can also allow you to influence specification — floor-to-ceiling height, power supply, ESG features, car parking ratios — in ways that are not possible once a building is constructed.

The Secondary Discount Is Real

The divergence between prime and secondary markets offers opportunities for occupiers who can be flexible on specification. A business that can occupy a well-located but older unit — and manage its own fit-out and energy costs — may be able to negotiate materially better terms than the prime market headline figures suggest.

In some secondary locations, landlords are negotiating headline rent discounts, extended rent-free periods, and longer break provisions that were simply not available 18 months ago. The deals are not being publicised, because neither party typically wants to undermine comparable evidence in the same location.

Finding the Right Space for Your Business

Prime rents are rising, but secondary space offers value for businesses that know what they actually need — and what they do not. The challenge is identifying motivated landlords before a property reaches public marketing, when the incentive to negotiate has already reduced.

RE:match gives occupiers access to landlords and agents who are actively looking to fill space. You post your requirement — sector, size, location, timing — and the market responds directly to your brief.

Post your requirement on RE:match — it takes a few minutes and costs nothing. Landlords and agents with matching space respond directly to your brief at rematch.co.uk.

FAQ: Prime Rents and Capital Values in 2026

Why are commercial rents rising while property values are flat? Rents are rising in prime, well-specified stock due to supply constraints and sustained occupier demand. Capital values are flat because investors are applying a higher discount rate (yield) to that income, driven by gilt yields at multi-decade highs and higher financing costs.

What is a prime commercial property? Prime commercial property is generally defined as the best quality stock in the best location for a given market — well-specified, recently built or refurbished, with strong ESG credentials and excellent transport access. The distinction between prime and secondary has widened significantly in 2025–2026.

What does EPC mean for commercial property? Commercial properties must have an EPC rating to be let legally. Minimum standards are tightening; buildings rated F or G are unlettable in most circumstances. The requirement to comply by 2030 for E-rated and above is creating a two-tier market.

Is Grade A office space available in regional cities? Supply is tight. Pre-letting is common for new developments. Businesses with Grade A requirements in Bristol, Manchester, Edinburgh, and similar markets should engage early and consider pre-letting if their requirement allows.

Should I consider secondary commercial space? For many businesses, secondary space offers value for money that prime space does not. The key considerations are location relative to your workforce, energy costs (which are higher in older buildings), and whether the space can be adapted to your needs. In the right circumstances, secondary space with a motivated landlord can be negotiated to very attractive terms.