The UK commercial property market has endured a prolonged period of adjustment. Rising borrowing costs, shifting occupier demand, and broader economic uncertainty have combined to suppress activity across most sectors since 2022. Whilst we recently explored the recalibrated retail sector, there are further measured reasons to believe the cycle may be beginning to turn.
The latest RICS UK Commercial Property Monitor for Q4 2025 suggests that sentiment is steadying. And for commercial property owners across the UK, this emerging stability carries practical implications, not least when it comes to ensuring the full financial value of their assets is being realised.
A Market Finding Its Footing
The Q4 2025 RICS data paints a picture of a market that remains subdued, but one where the pace of decline is slowing. The Occupier Sentiment Index improved modestly, moving from -12 in Q3 to -10 in Q4, a signal that downward momentum may be easing rather than accelerating. More notably, around 32% of survey respondents now believe conditions are consistent with the early stages of an upturn, compared with 27% in the previous quarter.
Tenant demand continues to fall in aggregate, with retail experiencing the sharpest contraction. Office and industrial sectors remain in negative territory, though the readings are less pessimistic than they were six months ago. Available space continues to rise, but the rate of increase has moderated, another indicator that the market may be approaching something closer to equilibrium.
This is not a recovery in the traditional sense, It is the beginning of stabilisation, and for owners and investors, that distinction matters.
Prime Assets Continue to Lead the Way
One of the clearest themes emerging from the data is the growing divergence between prime and secondary assets. Expectations for rental and capital value growth have been upgraded across prime markets, with respondents expressing greater confidence in the medium-term outlook for well-located, well-specified properties.
By contrast, secondary stock, particularly in office sectors, remains under pressure. Older buildings that require significant capital expenditure to meet modern energy efficiency and occupier standards are proving difficult to reposition, and the pricing gap between prime and secondary continues to widen.
For property owners, this divergence underscores the importance of understanding not just where the market is heading, but where individual assets sit within it. The question is no longer simply “what is my property worth?” it is “am I extracting the maximum value from what I already own?”
The shift from capital growth to income-led investment has been one of the defining features of this market cycle. In a higher-rate environment, yield stability and cash flow reliability have become the benchmarks by which commercial property is assessed. MSCI data confirms that income has accounted for the majority of total returns across many sectors over the past eighteen months.
This recalibration has brought renewed focus to the financial efficiency of property ownership. Investors and operators are examining every lever available to protect margins, reduce tax exposure, and strengthen post-tax returns, particularly in sectors where occupancy remains robust but pricing has reset.
It is within this context that Capital Allowances become strategically significant.
Improving cashflow by decreasing overall tax liabilities
For commercial property owners navigating a market in transition, Capital Allowances continue to represent one of the most effective and underutilised mechanisms for improving the financial performance of an asset, without altering a single lease, increasing risk, or deploying additional capital.
Capital Allowances provide tax relief on qualifying expenditure embedded within commercial properties. Items such as heating and ventilation systems, electrical installations, lighting, fire protection, security systems, and sanitary fittings may all qualify. On average, 27.5% of a property’s purchase price can be recovered in unclaimed allowances a figure that, in the current yield-sensitive environment, can materially improve post-tax returns.
Yet despite the scale of this opportunity, the majority of commercial property owners remain unaware that relief is available on assets they already hold. Capital Allowances sit at the intersection of property valuation, tax legislation, and surveying, a specialism that falls outside the scope of most general accountancy practices. Without a dedicated review, the embedded value within a property remains locked and unrecovered.
Why Now?
Market turning points, even tentative ones, tend to prompt activity. Investors review portfolios. Owners reassess hold strategies. Refinancing conversations begin. And in each of these scenarios, a clear understanding of the tax relief available within a property adds both clarity and value.
Whether you are considering a disposal, refinancing existing debt, or simply looking to improve cash flow from a held asset, a Capital Allowance review can provide a meaningful financial benefit. Claims can be backdated, they are HMRC-compliant, and they require no change to the way a property is managed or operated.
For those acquiring commercial property during this period of stabilisation, and investment volumes are rising, particularly from overseas buyers, ensuring a Capital Allowance assessment forms part of the due diligence process is essential. Section 198 and Section 199 elections, which govern the transfer of allowances between buyer and seller, must be handled correctly at the point of transaction to preserve full entitlement.
The UK’s Leading Independent Capital Allowance Specialists
At HMA Tax, we work alongside property owners, investors, accountants, and legal professionals to identify and recover unclaimed Capital Allowances across every major commercial property sector, from offices and hotels to care homes, industrial units, and retail environments.
Our in-house team of tax advisors, accountants, and chartered surveyors has completed over 8,500 claims, identifying more than £750 million in allowances for UK commercial property owners to date. Every claim is built on precision, compliance, and a commitment to delivering measurable results.
As the commercial property market begins to show signs of steadying, now is an ideal time to ensure your assets are working as hard as they should be, both operationally and fiscally.
How We Can Help
If you own UK commercial property and have not yet explored Capital Allowances, or if you are in the process of acquiring, refinancing, or repositioning assets, we would welcome the opportunity to discuss how we can help.
Contact our team for a confidential conversation, or use our online eligibility calculator to find out whether your property qualifies.
