CoStar catches up with leading industry figures to reflect on the standout stories and trends
By Paul Norman with quotes from Charles Ferguson Davie
CoStar News
A year that began with high hopes for strong UK real estate activity had, by the time of the Mipim real estate conference in March, already become bogged down by concerns over global tariffs and economic uncertainty. It has only really began to show signs of sparking back into life after the government’s much-delayed November Budget.
But optimism is returning. As 2025 draws to a close, major deals are getting over the line in an ever-wider array of sectors and locations. That suggests that over the last 12 months, the market has become more comfortable with the dramatic changes that had stymied activity, particularly in offices and retail.
CoStar’s UK analysts are now predicting that commercial transactions are on track to broadly match last year’s £55 billion. By mid-December, Savills was forecasting £50 billion of trades, thanks to “continued uncertainty”, but said 2026 should see at least a 10% increase to £55 billion.
Savills was feeling confident enough to call the UK commercial real estate investment market for 2025 by mid-October, saying combined volumes for the office and industrial sectors would exceed 2024’s. As of the end of September, it had tracked £7 billion and £6.2 billion of investment deals in the industrial and office sectors respectively, against 2024 full-year volumes of approximately £10.8 billion and £9.9 billion. Adding in the volume it had as under offer or at an advanced stage, Savills anticipated the final quarter would be enough to see last year’s numbers surpassed.
That still does not translate to a bumper year, and it would be wrong to suggest it is not a tough market. But in recent weeks, CoStar News has revealed that Hayfin has completed the largest central London office transaction in three years, buying the “Can of Ham” for around £335 million, and that Norway’s sovereign wealth fund Norges is in talks to buy the Fruit and Wool Exchange in the City for £300 million.
CoStar News also revealed that Frasers, the dynamic retailer that owns Sports Direct and Flannels, had spent close to £500 million on retail real estate, at Braehead shopping centre in Glasgow and the Swindon Designer Outlet Centre.
The depth of activity in terms of locations and in different sectors is an important sign of the market’s recovery.
JPMorgan and Visa’s massive post-Budget commitments to London’s rebounding Canary Wharf district has been a standout story about an improving submarket, while occupiers in general have continued to pay strong rents when choosing to move to prime new space.
There is an increased appetite for lending too, which is resulting in major new financings including Sumitomo Bank backing ICG Real Estate’s acquisition of a portfolio of UK and Europe Lidl stores for €203.5 million with an €120 million loan at 60% loan to value, Deka entering talks to back Hines’ circa £185 million acquisition of Worship Square, and Hayfin financing the Can of Ham with circa £200 million from Santander and CaixaBank.
The standouts
There has clearly been far more to 2025 than meets the eye. So what were the standout trends and stories for the UK’s commercial real estate leaders?
Cameron Ramsey, EMEA and UK capital markets research and strategy director at JLL, believes the year delivered the “essential stability and liquidity needed” in the market. “2026 is poised to capitalise on this,” he forecasts, “driving a more active and dynamic commercial real estate environment through diverse capital inflows and a strategic focus on creating and enhancing value across all asset classes.”
Arvi Luoma, a senior managing director at Cain International, says that 12 months ago it felt as if the trough had been reached and everyone was a bit more optimistic. “But then in Q2 and Q3 with a lot of chaos around the [US] tariff conversations, that changed. I think there is evidence the tariffs had a more subdued impact on the economy than people had been suggesting, but starting to place bets on factors that are entirely out of your control is not what we do as a house – we are looking at sectors we fundamentally believe in on a long-term basis.
He adds that the corporate world is even more keen to see less volatility and therefore it affected the occupier base which is what drives real estate. “But real estate is fundamentally an industry for optimists and it does feel as if it is now a day closer to the good old times.”
Charles Ferguson-Davie, chief executive and chief executive at Moorfield Group, says key to understanding 2025 is the fact that investors remained highly selective. The UK is still attracting capital, but investors are focusing on best-in-class assets, sector-specific allocations where there is a long-term structural growth story or a discounted entry opportunity.
“We have seen a recovery of interest in prime London offices, and continued interest in residential for rent – encompassing multifamily, single family and student accommodation – and logistics, where inflation-linkage, needs-based demand drivers and supply constraints represent long-term structural drivers. There is also interest in situations where high debt costs, limited capital availability and the presence of motivated sellers with liquidity pressures have presented attractive opportunities.”
Pricing has stabilised. Across the UK, Savills says the prime average yield remained stable for seven months from March to September 5.75%. Yields in 10 sub-sectors had remained flat for more than a year, while four sub-sectors – offices in the City of London, leisure parks, food stores and London core leased hotels – had all seen downwards pressure on yields.
Colin Thomasson, CBRE’s head of UK investment properties, described 2025 as a year of two halves: “The first half was more difficult than we anticipated for a number of reasons largely out of our control. We ended the last quarter of 2024 with a strong degree of optimism, believing that the change of administration in the US would bring clarity and benefits to commercial real estate sectors globally and the UK. But then came the conversation around tariffs, liberation day, and ultimately, rates stayed higher for longer. That led to market uncertainty and volumes were not transacting at levels we had anticipated.”
He says that dynamic changed moving into the second half. “There has been a general understanding of where the market is, tariff announcements have played through, the geopolitical environment has settled somewhat and now we are starting to see rate cuts. There is a rising confidence and that has resulted in higher levels of transactional activity and we are recovering some of the ground lost in the first half of the year.”
Thomasson says his company’s house view is that volumes by the end of the third quarter were down around 12% but the market is recovering well in the fourth quarter. “I doubt overall volumes in 2025 will be up on 2024 but I do not think it will be materially down.”
James Seppala, Blackstone’s European chairman, says the private equity giant believes the recovery in real estate in the region is gaining momentum and, with supportive debt capital markets, this should continue through 2026.
“We have made clear our intention to invest in $500 billion in assets in Europe over the next decade. In real estate, this means targeting assets aligned with powerful structural trends.” He describes the trends as e-commerce growth, more leisure spend, and the digital economy’s demand for data and computing capacity.
“We expect some of these priorities will come to fruition in 2026, and we are particularly excited about the launch of Proxity, our newest European last-mile logistics platform, and reinforcing our position as a leading investor in data centres across the continent. Backed by healthy cash flow growth, increasingly liquidity and reduced new supply, we believe we are well placed to capture opportunities and invest where we see enduring demand drivers.”