Real Estate in 2026: What to watch

This article sets out our perspective on the regulatory changes and market dynamics likely to shape the UK real estate industry in 2026, drawing across transactions, construction, environment and planning to help clients navigate what promises to be an active year. 

Real estate transactions: adapting to a change framework

We expect the Renters’ Rights Act 2025 to usher in significant changes to residential landlord and tenant law, which will require the residential letting market to adapt in turn. The Act’s core policy objectives on improving management standards and reducing uncertainty for renters are particularly aligned with the build-to-rent sector, where greater security and professionalised management are already more common than in the traditional private rented sector. Further regulations and guidance are anticipated early in the year ahead of the first implementation phase on 1 May 2026, and market participants should begin planning for staged compliance now. Although the PBSA sector is generally exempt from the new regime, student accommodation landlords must get up to speed with the key changes now.

Separately, the proposal to ban upward‑only rent reviews in new business leases within the English Devolution and Community Empowerment Bill caught the property industry off guard, and its progress will be closely watched through 2026. Against this backdrop, landlords should reassess rent review mechanisms and broader income protection strategies to maintain predictable cash flows should the ban proceed. 

Construction: efficiency, technology and sectoral opportunity

The autumn budget retained a substantial capital investment envelope of £120 billion with a clear signal toward urban regeneration and energy efficiency upgrades that elevate retrofit and fabric‑first approaches. We anticipate clearer briefs on energy and carbon outcomes and the growth of portfolio‑wide programmes that pair near‑term “quick wins” with deeper phased refurbishments, favouring delivery partners who can evidence whole‑life carbon, cost and performance through robust data. For owners and occupiers, the business case is compelling aimed at lower operating costs, improved Energy Performance Certificate ratings and more resilient assets in an increasingly performance‑driven market.

Modern methods of construction and off‑site manufacture are building momentum where repeatability, quality and speed are decisive, with modular, panelised and kit‑of‑parts strategies expected to expand beyond residential into education, healthcare and light industrial, supported by persistent demand in logistics and warehousing. Benefits include fewer site hours, safer delivery, tighter tolerances and reduced waste, and these methods can also buffer projects against weather‑related disruption. We also expect increased adoption of Building Information Modelling (BIM), with federated models extended into operations to support asset management and accelerate AI integration. A recent academic review suggests BIM can reduce overall costs by up to 60% and project duration by up to 50% while enabling more sustainable outcomes, underscoring the productivity and ESG upside of digital delivery. More broadly, AI, machine learning and analytics are set to move from pilot initiatives into daily practice, automating risk detection, forecasting programme slippage and optimising asset performance.

Demographics also point to a durable opportunity in care homes. By 2072, the Office for National Statistics projects that 27% of the UK population will be aged 65 or over, up from 19% in 2022, with the overall population expected to reach 70 million in 2026. This shift underpins sustained demand for repurposing and repositioning existing stock and delivering new purpose‑built schemes, with an estimated 144,000 additional beds required by 2032 to meet needs.

Environment: compliance tightening and market signals

Regulation of PFAS “forever chemicals” is set to tighten. The Health and Safety Executive has recommended restricting PFAS use in fire‑fighting foams, with a final risk assessment expected by August 2026 after which government will determine whether to implement a phase‑out.  Growing awareness of the risks and the remediation challenges for soil and groundwater mean PFAS is rapidly becoming a significant diligence and development issue for property players.

Energy Performance Certificate reforms are also on the horizon. We expect an overhaul of EPC rating metrics with a two‑tier assessment that elevates building fabric performance, coupled with shorter certificate validity periods and renewal on expiry for rented premises. A government decision is awaited on raising the minimum energy efficiency standard from the current EPC Band E to Band B for commercial property by 2030, a step that would have material implications for refurbishment planning and capital expenditure. We understand from market conversations, this date is expected to be extended to 2025. 

On sustainability reporting, endorsement of the UK version of ISSB standards early in the year should catalyse further consultations in 2026 by both the Financial Conduct Authority and the government on mandatory disclosure requirements. Listed companies may see transition plan obligations embedded into the regime, while the position for non‑listed companies will depend on whether separate consultation is pursued.

From 1 January 2027, the UK Carbon Border Adjustment Mechanism (CBAM) is due to apply to specified carbon‑intensive goods imported into the UK, with much of the operational detail expected to emerge over 2026. The scheme aims to level up import prices where greater carbon costs are faced by UK manufacturers, and  importers of CBAM goods above £50,000 in value over the relevant period may need to register with HMRC.

The government is expected to consult on a Circular Economy Strategy in early 2026, incorporating initial sector roadmaps that include construction. This strategy is intended to provide an umbrella framework across waste collection and packaging reforms and will sit alongside the continued roll‑out of extended producer responsibility for packaging through the year.

The government intends to continue its programme of planning reform in 2026 with a focus on catalysing development activity and housebuilding in particular. Shortly before Christmas, it released a proposed revamp of the National Planning Policy Framework (NPPF), based on a clearer "rules based" approach. The draft NPPF for the first time separates policies into those relating to plan making and those relating to decision making with the intention that local plans can concentrate on genuinely local issues. The draft proposes some radical changes to national policy, the most notable being a presumption in favour of development within walking distance of train stations located outside settlements. We are likely to see a radically different NPPF later this year.

The Planning and Infrastructure Act 2025 which passed in December, seeks to streamline decision‑making by reducing the role of local politics where possible, enabling more schemes to be determined by officers rather than committees, and allowing local planning authorities to set their own planning fees to bolster resourcing. It also proposes to simplify compulsory purchase and land compensation to facilitate public sector‑led land assembly and introduces a controversial alternative for discharging certain environmental obligations via a nature restoration levy, which could be mandatory in some cases.

In London, emergency planning measures are expected to support delivery. The government is consulting on allowing developers to reduce Community Infrastructure Levy payments where schemes meet specified affordable housing levels - 20% for private land and 35% for public land are currently mooted. The Mayor of London would also be able to call in housing schemes of 50 homes, down from 150, to address stalled projects more quickly. 

The government is further proposing to limit the extent to which statutory undertakers can delay application determinations by narrowing the categories of proposals that require referral, with the objective of enabling local planning authorities to issue decisions more swiftly.

Taken together, these measures point to a year where regulatory clarity continues to firm up and delivery levers are tuned to accelerate outcomes, while compliance expectations, particularly on energy performance, transparency and environmental risk, continue to rise. Those who align early with the evolving policy direction, invest in modern delivery and data capabilities, and position portfolios for resilience will be best placed to capture opportunity in 2026 and beyond.

Want to know more?

• Click here to read our predictions for commercial real estate disputes in 2026.
• Click here to read our ten tax predictions for the global real estate industry in 2026.

Authors: Alison Murrin, Expertise Counsel; Claire Dutch, Partner; Julie Vaughan, Counsel; Joanna Fox, Senior Associate; Conor Murphy, Associate