The UK real estate market is cautiously eyeing a potential rebound in 2025, with experts anticipating a resurgence in activity and capital investment across various property sectors. As the industry emerges from a period of uncertainty, stakeholders are expressing optimism about the year ahead, calling for supportive policies and a revitalized business environment to unlock the sector’s full potential.
At Bisnow’s recent Women Leading Real Estate event, a sense of cautious optimism prevailed, with many in the industry predicting increased capital deployment and a rise in transactions across UK property assets in the coming year.
Signs of Market Stabilization
According to CBRE’s UK Real Estate Market Outlook 2025, there are clear signs that the market is approaching a turning point. Commercial property, in particular, is being viewed as an area ripe for investment after reaching a market trough in 2024. Analysts forecast a 15% uptick in investment activity in 2025, driven by declining interest rates and more favorable borrowing conditions.
Judy Fawcett and Sheelagh Cooley, real estate experts from Shoosmiths, emphasize that while opportunities are emerging, the government must ensure the industry is supported by policies that encourage viability and reduce unnecessary regulatory barriers. They argue that only through these measures can the sector transform the built environment, create new housing, and stimulate economic growth.
Growth in Key Sectors: Logistics, Living, and Residential
One of the standout trends is the continued growth in the industrial and logistics sectors, which have been a focal point for real estate investment firms like Shoosmiths. During Q3 2024, the firm reported significant activity in these areas, with notable deals and a strong market sentiment.
The residential sector, particularly Build-to-Rent (BTR) and Purpose-Built Student Accommodation (PBSA), also remains a high performer. Both sectors saw substantial investment in Q3 2024, with BTR recording £800 million — the second-highest quarterly performance in the last four years. PBSA investments also saw impressive figures, approaching £840 million for the same period.
Shoosmiths has played a key role in several high-profile transactions, including advising on a £120 million BTR project in Leeds and a joint venture between Invesco Real Estate and PLATFORM_ to convert office space into residential units.
Institutional Investment and Long-Term Growth
A key theme at the Bisnow event was the institutionalization of BTR and PBSA, which are seen as central to the UK’s residential real estate strategy. The Berkeley Group, a major player in the BTR market, unveiled plans to invest £7 billion over the next decade, focusing on land acquisition, BTR development, and shareholder returns. This ambitious strategy underscores the long-term growth potential of the UK’s residential market.
The UK government’s commitment to addressing the country’s chronic housing shortage further reinforces this focus on residential real estate. With plans to deliver 1.5 million homes by the next parliamentary term, many investors are positioning themselves to capitalize on the demand for housing. Knight Frank’s latest European Living Sectors Investor Survey reveals that nearly 41% of investors plan to significantly increase their investments in the residential sector over the next five years, potentially unlocking €64 billion in capital.
Mixed-Use Developments and Urban Revitalization
In 2025, much of the real estate sector’s growth is expected to be driven by large-scale regeneration projects that integrate residential, commercial, and leisure spaces. These mixed-use developments are in line with the government’s brownfield-first policy, which prioritizes urban revitalization and economic growth through the development of previously underutilized land.
The Bisnow event highlighted that the future of UK real estate lies in these integrated developments, which not only address the housing crisis but also meet the evolving demands of urban living. The focus is shifting from standalone residential projects to holistic developments that incorporate workspaces, leisure facilities, and community spaces.
Navigating Challenges: Planning and Funding
Despite the optimism, significant challenges remain, particularly around planning and funding. Speakers at the Bisnow event highlighted planning delays as one of the sector’s key hurdles, although recent government proposals to update the National Planning Policy Framework (NPPF) are seen as a positive step towards addressing these issues.
Additionally, while funding conditions remain relatively tight, many in the industry are hopeful that ongoing efforts to ease credit conditions will pave the way for increased investment and development activity. Market observers are also watching closely for potential interest rate cuts, with the swap market indicating that the Bank of England may reduce rates by up to three times by the end of 2025.
Global Perspective: UK Remains a Strong Investment Destination
While global political and economic instability has raised some doubts, real estate investors remain confident in the UK’s position as a global market leader. Despite recent turbulence, industry leaders are hopeful that 2025 will mark a return to stability and growth, positioning the UK as an attractive destination for real estate investment.
As the market regains momentum, the role of the government will be critical. Unlocking the sector’s full potential requires an environment that reduces red tape and supports long-term viability, which will ultimately drive the delivery of new housing, infrastructure, and economic growth. The industry is at a pivotal moment, and the decisions made today will shape the future of UK real estate for years to come.
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