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CoStar Group Inc (CSGP)
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CoStar Group Reports Narrowing Office Yield Gap Between London and Major Regional Markets

Last updated: May 22, 2026
Taurigo

On May 22, 2026, CoStar Group Inc. released significant data revealing a narrowing office yield gap between London and the UK's major regional markets. This shift, attributed to improving investor sentiment, signals an evolving landscape in commercial real estate.

1. Rising Yields in London

According to CoStar's analysis, London’s transaction-based office yield has seen an increase of 50 basis points, reaching 6.5% in the first quarter of 2026. This marks an uptick from 6% in the previous quarter, and a notable recovery from a recent low of 5.8% recorded in Q3 2025.

Mark Stansfield, Senior Director of Market Analytics at CoStar Europe, noted the significance of this rise: “Average office yields outside London fell slightly after reaching a 12-year high at the end of 2025, with regional yields declining by 30 basis points in Q1 2026, though remaining elevated at 10.3%.” The narrowing yield spread between London and the regions has decreased from 480 basis points two quarters prior to 370 basis points, although this gap remains historically wide.

2. Performance of Central London and the Big Six

In a more detailed breakdown, average central London office yields rose by 30 basis points to 5.7%. Meanwhile, yields in the Big Six regions (which include the largest cities outside of London) compressed by the same margin, down to 8.8%.

Stansfield highlighted the implications of these shifts: “The yield spread between central London and the Big Six narrowed to 310 basis points, down from 430 basis points two quarters ago, when the gap reached its widest this century.” This reduction indicates a growing competitiveness in the regional markets relative to London.

3. Stability in Retail and Industrial Yields

The report also noted stability in retail yields, which held steady at 7.1%. Conversely, industrial yields compressed by 20 basis points to 6.9%, ending a trend of increases that had characterized the previous year. This stabilization in retail yields could reflect a broader shift in consumer behavior and market dynamics.

4. Conclusion

The findings from CoStar Group’s latest report underscore a pivotal moment for investors and stakeholders in the UK commercial real estate market. As investor sentiment improves and yields begin to adjust, the narrowing gap between London and regional markets could present new opportunities for growth and investment.

For further insights and detailed analysis, interested parties can explore CoStar Group's comprehensive offerings at their official website. With a commitment to digitizing real estate and providing market intelligence, CoStar continues to be a vital resource for industry professionals.

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