Real Estate 360° | 2025
Asset class trends
Investors set to double down on beds and sheds
The living sectors continue to be the darling child for investors. The appeal is clear, with certain living asset categories experiencing double-digit rental growth, a trend driven by evolving demographics and the supply-demand imbalance. In residential developments, alongside more established assets such as Build-to-Rent (BTR), more innovation is set to drive growth.
Top 3 property sectors anticipated to achieve most investment growth over the next 12 months
PRS/Residential
Industrial/Logistics
Student Housing
Investors will be closely monitoring government policies, including the Renters Reform Bill. However, rent freeze legislation introduced in Scotland has dampened investor enthusiasm, slowing BTR pipelines this year.
Industrial and logistics have rebalanced following a boom during the pandemic, but remain a top pick for 18% of our surveyed real estate leaders. The government's industrial strategy and recent summit to attract investment, along with a policy of deregulation, contribute to the positive outlook for these assets.
The beginnings of a retail recovery?
We calculated the net data between our respondents’ views on the highest and lowest growth expectations in asset classes. Optimism for holding retail assets has risen slightly, recovering from a drop below -20% last year. The sector has repriced, and yields are forecast to harden in 2025. Prime sites remain attractive, with around 80% of consumer purchases still occurring in physical stores and retail parks having experienced significant deal activity in 2024. However, the significant employment tax rises imposed on retailers in the autumn budget could derail this upward trajectory.
Investor top picks most growth v least growth (net difference)
The chart above reflects respondents' net data % ranking of assets for highest growth -% ranking for least growth.
Meanwhile, offices are fixed in last place. Demand for prime assets persists due to a lack of supply and new development activity, but concerns are focused on secondary stock in certain locations. With declining tenancy demand and high costs for repurposing and improving energy ratings, the threat of asset obsolescence is growing.
Q4 2024
No major projects (£100m+) started on site in the office sector
Detailed planning approvals also slipped back 59% compared to last year
Source: Glenigan
London remains the most sought-after location for investment, with 53% of respondents predicting it to be the region set for most growth in commercial property, while 48% ranked it highest for residential growth. The Midlands and Southern England followed in the rankings, with proximity to London being a key driver.
Property values to increase in 2025
Respondents expect property values to increase in the year ahead, with the majority anticipating growth of between 1% and 10% across both residential and commercial properties.
Compared to now, how do you expect the general value of UK real estate assets to change over the next 12 months?
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Residential
■
Commercial
Increase
No change
Decrease
Residential
Increase
No change
Decrease
Commercial
Increase
No change
Decrease
We enter 2025 with cautious momentum. Transactions increased by 10%, with a notable surge in Q4 2024. The market has repriced, and real estate businesses may revisit previously tracked deals that now appear more attractive and could ramp up activity. While construction costs for new developments remain high, they look less inflated going forward. The quality of asset will be a major factor, providing stable returns and creating value for future exits. However the labour shortage tension that is building in the supply chain could inflate pricing as volumes increase.
