Funding and global investment
Funding flexibility driving sentiment shift
More stable macroeconomic conditions, including four interest rate cuts last year and less uncertainty following the Autumn Budget, have moved the dial on funding confidence. The UK Real Economy Financial Conditions Index has been at its most accommodative levels in recent months. The Credit Impulse also shows a post-Budget rebound in borrowing for both businesses and consumers.
These more supportive financial conditions are reflected by over half of our respondents expecting access to funding to remain steady this year. And nearly a fifth anticipate conditions easing further.
Access to funding sentiment in the year ahead
Capital is also available from a broader mix of sources, including UK private investors, family offices, banks and institutional lenders. This diversification of sources is reducing reliance on any single channel. Combined with improving returns and some market repricing last year, is reinforcing real estate’s appeal and restoring liquidity. While 34% of real estate leaders rank UK investors top, respondents remain split on the other options, underscoring the broader spread of capital across the market.
The sources of capital considered the most available over the next year
Private equity continues to create value
Private equity influence across real estate is growing, bringing capital, sharper operational discipline and a focus on value creation. Businesses that can demonstrate resilience, sustainable income and strong financial performance are the ones attracting interest.
Those already backed by private equity report benefits far beyond financial engineering, such as improved systems, more efficient operations, strategic bolt‑on acquisitions and the scale needed to compete. This value‑creation mindset is reflected in 93% of the real estate portfolio businesses that were surveyed.
Private equity as a value driver, beyond financial engineering
Assets in the living sectors remain the strongest draw for private equity, with 53% of our respondents ranking them as the asset class set to see the most investment. Several factors support stable income streams and create opportunities to build scale. These include structural demand drivers, including sustained rental need and demographic pressures as well as the ability to balance risk across BTR, single‑family homes and affordable housing. In addition, the scope to enhance operational performance and tenant experience allows private equity to build value over longer holding periods and ahead of exit.
Salik Chaturbhai
Director, Private Equity, RSM
Private equity is taking a longer-term view in real estate than in many other industries. Assets are being held for longer, which puts far greater emphasis on value creation, improving operations, building platforms through bolt-on operations and driving performance over time.
The expected private equity exit routes being considered
Average holding periods have stretched closer to 5-7 years to maximise value and exit strategies remain dominated by sales to private investors and secondary private equity buyers.
IPO activity is subdued, although our analysts expect an uptick within the next 12 to 24 months.
Global investment – Stronger from Europe, weaker from the Middle East
Europe again ranks highest in investment expectations from overseas, increasing on sentiment from last year. The Middle East has softened markedly compared to last year, a lower tax jurisdiction which may be more sensitive to UK tax rises. Respondents cite the UK’s low‑growth environment, tax complexity and high energy costs as key factors limiting overseas investment. Policy uncertainty ranks second on the list, with 40% of respondents highlighting UK regulation as a concern. Despite these challenges, the UK remains fundamentally attractive.