Outlook
for 2025
Welcome to our outlook for 2025, which considers the prospects for UK real estate in the year ahead across 10 key areas for the property sector:
Here, we briefly outline some key areas we think will shape the property market over the next year. For more detail, click on the sections above, or the links below.
Get in touch
Dan Francis
Head of Research
020 7518 3301
Email
020 7518 3301
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Colin Brown
Head of Planning & Development
020 7518 3301
Email
01223 326826
Email
Mark Hall-Digweed
Head of Infrastructures
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Email
Scott Harkness
Head of Commercial
020 7518 3236
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Email
0121 389 0409
Tim Jones
Head of Rural
01223 346609
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Lisa Simon
Head of Residential
020 7518 3234
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Executive summary
Economic and domestic political conditions should be more settled in 2025, with GDP rising, inflation close to target, a steady reduction in the base rate, and a modest loosening of the labour market. Government policy initiatives will also play a particularly significant role, assisted by Labour’s sizeable House of Commons majority.
The government’s commitment to accelerating the rate of residential development over the next five years will mean a raft of policy initiatives taking shape during 2025, from development in the so-called ‘grey belt’ to the delivery of large new settlements.
2025 could be a pivotal year in the residential sales market, with falling interest rates and rising real incomes leading to improvements in affordability
Conversely, the private rented sector should see a modest easing of demand, which has been unprecedentedly high in recent years, as new legislation places tighter restrictions on inward migration and international students. In addition, improving affordability should allow more renters to move into the owner-occupied sector. At the same time, ongoing pressures on private landlords, notably the anticipated Renters’ Rights Bill, will keep supply tight, allowing further rental growth.
The remote revolution continues to play out. We have now largely passed the post-pandemic period of office floorspace downsizing, although some corporates are still adopting policies to encourage (or mandate) employees to return to the office. Occupiers are placing an ever-increasing focus on high quality, highly sustainable office buildings, but the challenge of finding the space they require in core, well-connected locations will rise in 2025 amid constrained completion levels and significant pre-letting.
We expect a further modest uptick in the proportion of retail sales accounted for by online shopping, and this, plus supply chain reconfiguration and technological advances will continue to drive demand for logistics and last mile distribution space.
The government has moved the UK’s target of decarbonising the electricity grid forward by five years to 2030 and set out a more ambitious greenhouse gas emissions target. Upgrading energy infrastructure and facilitating new renewable energy generation and storage is essential for meeting these targets, as well as being increasingly key to unlocking development. We expect increased investment from both the public and private sectors in 2025.
The drive towards more sustainable, energy-efficient buildings will continue. The proposed deadline for a mandated minimum EPC rating of C in 2027 (for commercial buildings) is looming ever closer, increasing the urgency of upgrading buildings and planning for the repurposing those assets left stranded. We will also see increasing emphasis on refurbishing buildings rather than demolishing and rebuilding.
We expect continued investor diversification away from the three traditional sectors of office
Although the change to Agricultural and Business Property Relief from Inheritance Tax announced in the Autumn Budget has impacted sentiment in the rural land market, we do not anticipate a significant impact on values this year (the change is effective from April 2026). Indeed, there is a sizeable and diverse pool of buyers ranging from farming businesses purchasing at scale, to ‘green’ buyers looking to monetise environmental gains.
Increasing competition from potential buyers plus further interest rate cuts have the potential to exert downward pressure on property yields for the right assets. We expect continued investor diversification away from the three traditional sectors of office, retail and industrial, given the significant opportunities in areas such as infrastructure and the living sectors, where long-term structural drivers will continue to accelerate demand.
Click a sector below for more information
Click a sector below for more information
The government’s recently published industrial strategy focuses on innovation and technology across eight business sectors. These include life sciences, reinforcing the UK’s position as a global leader in this area.
Commercial property investment
London's office supply challenge
Residential sales
Residential lettings
Rural land
Energy infrastructure
Living
sectors
Science & technology
Housebuilding
Logistics
2025 could be a pivotal year in the residential sales market, with falling interest rates and rising real incomes leading to improvements in affordability, unlocking pent-up buyer demand and bolstering sales activity, particularly in the mortgage market.
The government’s recently published industrial strategy focuses on innovation and technology across eight business sectors. These include life sciences, reinforcing the UK’s position as a global leader in this area. This is a good starting point for accelerating growth in key sectors, and we await the publication of detailed proposals for each during 2025.
The UK is a major data centre hub, and 2025 will see accelerating demand growth, in line with rising use of cloud-based storage, online streaming services, 5G technology, The Internet of Things and AI. This will also create significant extra demands on the UK’s power network.
The two base rate cuts in 2024 and greater post-Budget certainty have provided a springboard for the commercial property investment market, and we expect rising momentum, with substantial capital waiting to be deployed.
Commercial property investment
London's office supply challenge
Residential sales
Residential lettings
Rural land
Energy infrastructure
Later / alternative
living sectors
Life science & tech
Housebuilding
Logistics
Commercial property investment
London's office supply challenge
Residential sales
Residential lettings
Rural land
Energy infrastructure
Living
sectors
Science & technology
Housebuilding
Logistics
Commercial property investment
London's office supply challenge
Residential sales
Residential lettings
Rural land
Energy infrastructure
Later / alternative
living sectors
Life science & tech
Housebuilding
Logistics