UK commercial property shows good recovery rates
UK commercial property continues to recover. Following the local elections and the change of president in the US, investors are ready to commit to new projects, leading to optimistic forecasts for 2025.
Last year’s results
Despite the continued uncertainty in 2024, the commercial property market has shown growth. The value of office and industrial property increased. Investment in the sector rose by 20% compared to 2023. However, the figure remains below the average of the last ten years.
The limiting factors for the development of the sector in 2024 were:
– the reduced availability of finance in the first half of the year;
– the cautious strategy of buyers who were not in a hurry to invest in new projects;
– the seller’s reluctance to put assets on the market when market conditions are weak.
Although the past year has been challenging, the sector has shown growth that has consolidated the recovery trend.
Forecasts
According to analysts, we should expect more investor activity in 2025. One of the main factors improving the situation in the commercial property sector is the reduction of the key interest rate. It is likely to fall by around 100 basis points in 2025-2026, reducing the cost of loans. At the same time, debt levels should rise in most markets.
Analysts are forecasting GDP growth in the UK and increased business activity for the current period. This bodes well for the commercial property sector. The residential market is also expected to pick up. A number of regions in the country are experiencing low vacancy rates, leading to an increase in rental prices. The limited supply of new housing will also support this trend.
UK commercial property market trends
Investor interest is likely to focus on the retail sector. Demand for shopping centres, warehouse complexes, and commercial space in central locations is expected to be strong. Given current market trends, investors will focus on capital growth while seeking to generate income in the short term.
In recent years, investors have concentrated on super-premium office space. This year, the emphasis will shift to other commercial properties in popular locations. At the same time, rental rates are likely to rise. This is because large office centres will not be completed in the next three years. Rising demand will encourage investors to look more actively at properties across the country.
Overall, the trends for 2025 are positive for the UK commercial property market. Quality office and warehouse developments will attract inward investment. This will help the market remain resilient despite the challenging domestic and global economic conditions.