Menu
Menu
Following a year in which the UK’s commercial property sector showed signs of recovery, we spoke to experts from across property and finance to gain insights into how they believe the sector will shape up across 2025.
Discover their thoughts on the economic environment, technological changes, the sectors they expect to perform, and the geopolitical threats that could derail growth.
While the UK has largely recovered from the high inflation and high interest rates that defined late 2022 and 2023, many of our respondents remain measured on their expectations for 2025.
The leading property consultants Eddisons gave a positive outlook for the year but raised job market concerns: “The UK economy shows encouraging signs, with inflation and GDP heading in a positive direction, helping to rebuild businesses and support investment.
“However, the increase in National Insurance contributions, combined with a lowering of thresholds, has worried a lot of professionals and could hamper and stall the jobs market.”
A leading investor in UK real estate who spoke to us anonymously reflects these worries about the jobs market, believing it could contribute to stagflation: “I believe the return of Labour’s tax and spend policies could have a sizeable impact on economic performance and that the UK is potentially set for a period of stagflation.
“This is likely to be exacerbated by downward pressures on the jobs market caused by wage growth, driven in part by the policies introduced by the Government.
“While stagflation offers many challenges, it can also present opportunities for investors within the real estate market, with certain assets potentially becoming available at an appealing discount.”
These stagflation concerns were echoed by the currency broker TorFX: “The combination of stagnant growth and persistent inflation has heightened fears of stagflation becoming entrenched in the economy, further discouraging investment.”
John Phillips of Kingswood Associates hopes we will see a brighter second half to the year after a slow start: “We anticipate the broader economic environment will continue to influence investment activity in 2025, with a slow start likely to gain momentum as the Bank of England lowers interest rates and the government revises restrictive policies.”
TorFX said: “Currently, turmoil in the UK bond market is deterring foreign investment, with the UK’s economic trajectory in question.
“The UK economy has gone from leading the G7 in growth in the first half of 2024 to flatlining in Q3 and potentially Q4. This presents a significant challenge for the government.”
The anonymised investor said: “One significant risk is presented by any potential shocks in the gilt market, which has proven volatile since the turn of the year. The repercussions of any such event could be felt across the economy at large.”
Our CEO Nigel Smith agrees with this sentiment, commenting: “The swaps market has seen heightened volatility, driven by rapid shifts in gilt yields and market sentiment.
“Such unpredictability could see reduced liquidity within the market as lenders look to manage the increased risk.”
There is broad confidence that both retail warehousing and logistics will continue to strengthen across 2025.
The anonymous investor said: “Looking ahead, we anticipate retail warehousing will likely be the outperformer of the year given its sensible pricing, high tenant demand and low supply, as well as its importance to omni-channel logistics.
“Industrial and logistics properties appear set to remain reasonable performers, fuelled by continued e-commerce growth and demand for rapid delivery solutions.”
“However, pressures on yields caused by high prices mean it is a less attractive investment prospect than in previous years.”
John Phillips said: “we anticipate the logistics, industrial, and office spaces will continue to perform, driven by evolving business needs as e-commerce continues to grow and more workers return to the office.
“While the market’s trajectory depends on a broad subset of global and domestic developments, opportunities are expected to emerge as economic and policy conditions hopefully stabilise.”
Eddisons held a similar view, stating: “Unsurprisingly, industrial and logistics sectors will continue to remain strong as they have done over the last decade, whereas others have struggled.
“Extended growth in e-commerce and reshoring will drive demand for warehousing, but how long this growth lasts is questionable.”
Jon Moffatt of Clifton Private Finance also echoed this, saying: “We believe that warehousing and industrial real estate will continue its strong growth following shifts caused by the move to online shopping and Brexit-related supply chain disruption – both of which have seen many businesses strengthen their logistical infrastructure and stockpile inventory.”
Technological advancements are tipped to have an impact on the market.
Brickflow’s Chief Revenue Officer Frazer Campbell said: “The specialist property finance space is maturing rapidly in terms of technology adoption.
“Borrowers, lenders, and legal professionals are starting to move their due diligence processes online, centralising decision-making.
“This shift creates more certainty in deals, enabling everyone involved to focus on achieving the best outcomes for borrowers. At the heart of this evolution is the borrower; they’re the ones who ultimately benefit the most.”
Eddisons said: “The adoption of new technology, particularly generative AI, and how governments embrace it remains to be seen, but will undoubtedly impact how our daily lives.
“The longstanding effect on the real estate industry is currently unknown, but it will change how we work for generations.”
Jon Moffatt also stressed the importance of technology within the sector: “2025 looks set to be a year in which technological shifts could cause significant disruption to the sector.
“We have invested in systems that ensure Clifton Private Finance is ready to meet this revolution in how tailored, specialist funding is delivered within the financial services sector.”
The BloomSmith team also believe that technological developments, namely AI, will continue to grow in significance within the marketplace: “Artificial intelligence will play an increased role in enabling lenders to automate risk analyses, align borrowers to tailored finance, and accelerating loan approvals through real-time predictive analytics.
“We believe that this, coupled with the volatile gilt market, could create an optimal environment for specialist finance – with many investors showing a growing appetite for the greater flexibility it affords.”
Donald Trump’s return to the White House is unsurprisingly high on the agenda, with mixed reviews on what that could mean for the UK.
Jon Moffatt said: “Donald Trump’s return to the White House represents the single largest external factor that could cause trade barriers among nations.
“Any increases in international tariffs could have unforeseen knock-on effects across all industries.”
While John Phillips held a slightly more positive perspective: “A Trump presidency geared towards smaller government and tax policies could lead to similar pressures being exerted on the UK Government – which could have a potentially positive knock-on effect for the UK market.”
TorFX said: “President Trump’s foreign policy is also expected to weigh heavily on global markets.
“His anticipated trade tariffs will likely increase tensions with China, the impact of which will ripple through financial markets.
“This, combined with elevated geopolitical risks, will likely shape investor behaviour in 2025.”
They also highlighted how the war in Ukraine could continue to influence UK inflation: “The ongoing war in Ukraine is likely to keep energy prices elevated, fuelling inflation, which remains above the Bank of England’s 2% target.
“Consequently, the Bank will find it difficult to reduce interest rates, keeping UK mortgage rates among the highest in the G7.”
On the domestic front, Eddisons highlighted that environmental policies could heavily affect the market: “The goalposts are constantly moving for occupiers and investors alike.
“More stringent EPC regulations are on the cards and are likely to change to align with global sustainability targets.
“As a result, many UK properties could be rendered unlettable or unsellable.”
The trends highlighted by our panel of experts represent an interesting mosaic of where the UK’s commercial property market sits.
Excitement about the opportunities represented by retail warehousing and the logistics sectors are encouraging to see but remain tempered by uncertainty within the wider economic environment.
While the influence of geopolitical factors outside of our control also continue to represent a potential threat to the market, we remain positive that technological advances can represent a reimagining of how finance is delivered to borrowers.
Get our latest news and knowledge delivered straight to your inbox
Subscribe now
By Signing up you confirm we can use your email address for marketing. More info can be found here