After a turbulent few years for UK real estate, with post-pandemic trends presenting fresh challenges for the commercial property market, partners working in the sector are finding new reasons for optimism.
With the UK’s ambitions to become a global leader in AI unlocking £100bn for digital infrastructure investment, the data centre surge is creating huge opportunities for real estate practices, while significant activity is also being driven by renewed interest in high-grade offices and retail spaces.
But while all of this is welcome news for commercial property partners, the sector is not totally out of the woods yet, with soft markets for secondary office stock and concerns over a potential ‘AI bubble’ serving as cause for caution.
So will these concerns shake the foundations of the sector? Or is 2026 set to be a good year to be a real estate lawyer?
‘AI is here to stay’
Victoria Landsbert, the co-head of White & Case’s global real estate group, is confident about the prospects for work driven by the AI boom. ‘Whether pricing [for data centres] will stay quite as buoyant as we’ve seen, I’m not sure, but AI is here to stay,’ she says.
Recently, Landsbert (pictured right) was part of the White & Case team which advised Cathexis Holdings on the sale of Yondr, a hyperscale data centre operator, to DigitalBridge and La Caisse – which, with a value of $5.74bn, was one of the biggest deals of the year.
One issue that real estate partners are cognisant of is the delicate balance between demand for data centres and their environmental impact. ‘They’re seen as critical infrastructure,’ says Landsbert. ‘There needs to be a balance between the environmental landscape and environmental controls, and ensuring things are powered as sustainably as possible, while servicing the needs of the globe for these technologies.’
Others concur, with CMS real estate co-head Chris Rae describing the issue as ‘a question of balance – and a question of location.’
‘New technologies mean that you can be more agnostic about where you construct, including regional locations. Usually you see development of clusters, say two or three data centres within a sort of proximity to each other,’ Rae adds.
Rae, who is based in Glasgow, has been front and centre on a number of significant developments in Scotland last year, including advising Lloyds Bank on the asset management and lease surrender of its Edinburgh data centre, as well as acting for Clydesdale Bank on the managed sale and leaseback of its two Glasgow data centres.
Rae (pictured right) says that widening the net across the UK can mitigate the environmental impact of data centres.
‘The main drivers are speed to delivery of capacity, locations with faster power connections, easier planning, proximity to end-users and interconnectors, ideally some existing infrastructure, including fibre – you can then be more relaxed about where,’ he says.
‘That’s really important, because it doesn’t then mean that it’s all about the South East so much anymore, where power supply, timeframes for connection, and availability or use of water can be particular issues,’ Rae concludes.
UK still a safe bet
With the data centre boom at the forefront, Linklaters real estate head Andy Bruce says the UK market has grown more appealing to international investors.
‘We have noticed a real uptick in the last quarter of the calendar year – typically on investment deals. I’ve seen this in the new instructions coming in over the last few months,’ he says.
Linklaters real estate counsel Jack Shand adds that investors are well-prepared for market volatility. ‘Investors are coming in really, really well informed, and the business plans and investment strategies are increasingly sophisticated, critically analysed and stress-tested,’ he says.
The magic circle firm’s team has been handling some big mandates with big names, including advising BlackRock on a joint venture to acquire and develop data centres across the UK and Europe, while the firm also acted on the other side of the Yondr deal to White & Case, acting for DigitalBridge.
Looking to the international markets, Bruce (pictured right) says: ‘For real estate, the Middle East remains a very active region for us as a firm – you can transport the real estate expertise that we have on investment and development in the UK and apply it with our Saudi colleagues to a Saudi law situation, and help bring international best practice to a market.’
Julian Pollock, who jointly leads the real estate investment practice at HSF Kramer, cites the UK’s appeal as ‘a very safe investment’.
‘A lot of the money coming into the UK, whether that is private capital money or sovereign wealth money, is coming from the US, the Middle East and Asia,’ he says. ‘The UK is still deemed to be a very safe investment for real estate, and on the matters that I’m dealing with at the minute, the sources of money are often international – more so than actual UK investment.’
Major mandates that HSF Kramer handled for international investors last year included acting for Canada Pension Plan Investment Board on its joint venture with US company Kennedy Wilson to invest in UK single-family rental housing, as well as advising a sovereign wealth fund on a £1.2bn joint venture with The Grosvenor Estate.
Other deal highlights for the firm included advised Shaftesbury Capital on Norges Bank Investment Management’s £570m purchase of a 25% stake in the Covent Garden estate.
One area attracting renewed interest is Canary Wharf, which after losing several big names from its distinctive skyline over the last decade, is regenerating as a residential centre.
HSF Kramer is advising on all aspects of the Canada Water Masterplan, which will see the creation of 3,000 new homes, 1 million square feet of retail property and 130 acres of parks and woodland in areas within close proximity of Canary Wharf.
The area once touted as ‘Wall Street on the Thames’ is attracting renewed interest from major financial corporations including Visa, which is relocating its European office headquarters to the docklands, and JPMorgan Chase, which is constructing a new skyscraper in the area to house 12,000 of its staff.
Bruce says interest in this part of London will be beneficial to London as a whole, citing a recent ‘purple patch’ for new lettings.
‘I think Canary is going places. Their vacancy rates are low, and they’re using their capital well to refurbish their buildings – and the Square Mile isn’t big enough to hold everyone,’ Bruce adds.
Only the best will do
One key post-pandemic trend has been the widening gap in interest between A-grade spaces and secondary real estate, as companies wake up to the need to attract their staff into more luxurious facilities.
One firm that has been active in the high-end City scene is Taylor Wessing, which last year advised Park Tower Hotel in Knightsbridge on its £348m refinancing, as well as a refinancing for Arlington House properties, located behind the Ritz Hotel.
UK head of planning and energy Alistair Watson (pictured right) acknowledges that while things are tough in the capital, it’s tougher still across the country.
To address this, Watson makes the case for a more relaxed approach to regulation.
‘Most of the growth [in 2025] came from the proliferation of planning policy papers and initiatives from the UK Government,’ he says. “Build, baby build” – three easy words for the Government to say, given it relies upon the private sector to create space and place.’
For Landsbert, the inconsistencies stem from consumer demand. ‘High-end retail is an experience – a lifestyle experience. Secondary retail is still in the doldrums – but I think high-end hotels will be interesting in 2026.’
For Rae, the extremes of real estate are becoming the standard. ‘The real estate sector has been a roller coaster ride,’ he says. ‘I think everyone needs to accept that the new normal is very much a faster pace of change.’
