In an environment where global capital markets have been defined by volatility, the UK commercial property market is once again becoming a credible home for international investors craving stability.

Once a matter of pandemic disruption and spiralling interest rates in the wake of the Liz Truss mini-budget, the sector is now quietly regaining international investor favour.

Against the backdrop of a complicated global geopolitical and investment climate, many international investors are taking a fresh look at the sector as a haven from instability.

With property investing a proven hedge against global inflation (a possible fallout of Trump’s tariffs), anticipated interest rate drops and significant upsides available from underpriced sterling denominated assets – British property could soon be back on the menu for many investors.

Overseas capital eyes UK real estate

Twenty years ago, less than 15% of the UK commercial real estate market was in the hands of overseas investors.

Today, international investors hold around 40% of the market – according to a recent report from CoStar – outlining their growing significance within the domestic market.

Despite some recent fallow years, commercial property confidence is slowly on the up as early signs of capital value growth re-emerges and the Bank of England hints at rate reductions later this year.

This is demonstrated by RICS Q4 2024 UK Commercial Property Monitor report, which claims more than 50% of respondents believe the market has either reached the bottom or entered an early upswing.

Hedging against American volatility, a growing number of US investors are also shifting capital into UK markets, underscoring a notable pivot in global investment flows.

Increased American capital in the UK could therefore bring with it a growing appetite to spend on British property, especially as the dollar continues to fall, offering a real shot in the arm for the sector.

Despite the market’s struggles, American buyers had already acquired UK commercial property assets worth £49.7 billion over the past four years, according to another CoStar report in collaboration with the British Property Federation.

This is without mentioning the significant investment that has been seen from various sovereign wealth funds, such as Norway’s recent 570m investment in the Covent Garden estate and the activity of Blackstone.

Industrial leads as offices stabilise

Market data supports the view that a recovery could already be here.

In December 2024, UK commercial property posted a total return of 1.1%—the highest monthly return of the year—driven by a 0.6% rise in capital values across all sectors, according to CBRE.

The industrial sector emerged as the standout performer, with capital values rising 0.9% and rents up 0.6%, indicating sustained demand for logistics and warehousing space.

Retail is also staging a modest comeback, with capital values up by 0.7%, led by retail warehouses, which saw a 0.9% increase.

Even the long-challenged office segment showed tentative signs of life: Central London office values edged up 0.1%, with slightly higher growth in outer London and regional markets.

Our caveat with respect to the figures above relates to the impact of inflation rather than outright demand – the emotional impact of the figures none the less remains.

Read more here on our office sector deep-dive.

Where will the finance flow?

As capital values stabilise and rental growth picks up, investors are likely to concentrate on sectors offering dependable income and long-term demand.

Industrial real estate remains the frontrunner, as stated above, particularly logistics facilities and modern warehouses in proximity to key transport infrastructure.

Meanwhile, the office sector is expected to see selective interest in assets with strong sustainability credentials, especially those meeting ESG standards demanded by institutional investors.

Anecdotally, the BloomSmith team has also seen an increase in investors requiring liquidity to capitalise on lower office valuations to deliver residential conversions.

Read our case study of an overseas Dubai-based investor purchasing an office block for a residential conversion.

Looking ahead

As global investors seek stability in an increasingly fractured macroeconomic landscape, the UK’s commercial property market is emerging as a compelling value play – particularly if the UK is seen as a bridge between the federal entities of the US and the EU.

The recovery may not be explosive, but for investors with patience and a long-term outlook, 2025 could present a rewarding chapter for UK commercial real estate.