UK Real Estate Economy to Improve in 2025
20/12/24
The economy is set to continue to improve in 2025, says property giants CBRE.
In its 2025 UK Real Estate Market Outlook, CBRE says that after reaching a 'trough' in 2024, the commercial real estate market will begin climbing in 2025.
The report says: "The earlier than expected general election helped bring a level of certainty to the country, albeit the long wait for the Autumn Budget was unnerving.
"Some of the measures introduced in the budget will be challenging for businesses, particularly the additional National Insurance Contributions effective from April 2025.
"Still, there is much to be positive about. The Invest 2035 strategy sets out a strong vision, highlighting growth areas including the life sciences, finance, and tech sectors and recognises the need for infrastructure improvements to underpin the growth agenda.
"The revision to the National Planning Policy Framework (NPPF) will start to feed through in 2025, with a return to mandatory housing targets and the introduction of the 'grey belt'. With it comes increased pressure for Local Authorities to review the Green Belt if they are unable to meet housing targets on brownfield land.
"Of course, planning changes alone won't solve the ongoing housing crisis. But it may help provide a well-needed fillip to house builders, which, coupled with a more stable economic backdrop and lower interest rates, will help drive momentum in the housing market. The proposals for a new raft of New Towns may help increase home delivery, but we are unlikely to see spades in the ground in 2025 (or 2026).
"It is becoming increasingly evident that the commercial real estate market reached a trough in 2024, and we expect the embryonic signs of a turning point to gather more strength in 2025. This, along with lower interest rates and lower costs of debt, will stimulate a pick up in investment in 2025 of around 15 per cent.
"2025 will see the return of Donald Trump to the White House. Trump's return to office will likely bring with it some fiscal stimulus and a tax policy favourable for real estate investors and occupiers in the US. Still, the possibility of import tariffs may not be so positive.
"The sustainability agenda remains a notable consideration for investors, developers, and occupiers. As does AI. Although it may take some time for its applications to be truly revolutionary, its impact on efficiency should continue to feed through quickly.
"On the surface, 2025 may seem like a benign year, with steadier economic growth and a relatively small pick-up in CRE. But the underlying picture and nuances will be far more exciting."
To read the full report, visit: UK Real Estate Market Outlook 2025 | CBRE UK