Commercial Property Market Review – March 2025

Regional office investment rebounds as confidence grows 

Investor sentiment in the regional office market has improved, with total investment reaching £2.9bn in 2024, up 10% from 2023, according to Savills.  
 
The Big Six regional cities saw office take-up of 4.6 million sq. ft, 15% above the five-year average and the highest since 2019. Opportunistic investors are targeting repriced assets with strong fundamentals. Overseas investors led the market, accounting for 41% of investment, with French SCPI funds particularly active. Property companies remain key players, representing 32% of investment volumes and many acquisitions are set for alternative use conversion. 

Despite macroeconomic uncertainty, corporate occupiers continue to pay premium rents, with prime rental growth in Greater London and the South East up 8% in 2024. On average, tenants relocating to Grade A offices are paying 69% higher rents per sq. ft than on previous leases, reinforcing the ongoing flight to quality. 

UK commercial property market shifts focus to industrial spaces 

Changing business needs are seeing industrial spaces playing a key role. 

Investment in industrial real estate is also surging. In 2024, UK commercial property investment grew by 20% compared to 2023, with industrial assets leading the way in the fourth quarter, according to Cushman & Wakefield. 

E-commerce and demand for advanced logistics have strengthened the sector, with 2024 take-up levels surpassing those of 2023 and aligning with long-term averages. Technology is transforming industrial spaces, with automation, artificial intelligence (AI) and smart logistics improving efficiency. Warehouses are evolving into high-tech hubs, integrating automated storage and AI-driven inventory management.  

Sustainability is another major focus, as properties must meet stricter energy efficiency standards. By 2030, 80% of commercial buildings could become unlettable unless they achieve an EPC rating of A or B. Landlords are increasingly repurposing industrial spaces, drawing inspiration from flexible residential developments. 

Remote work and sustainability helping to shape UK commercial property trends 

New research from Dutton Gregory highlights key trends in remote work, property valuations and sustainability upgrades. 

Remote working poses the greatest challenge in the commercial property market for 58.9% of survey responders. While hybrid working has increased demand for flexible office space, it has also affected property valuations, which 15% identified as the second biggest challenge. Supply chain disruptions (12%) and economic uncertainty (6.3%) were also concerns, though tenant retention (1.1%) and regulatory changes (1%) ranked lower. 

Sustainability is an increasing priority, with 34.2% planning to invest in solar panels. Renewable energy (30.1%) and EV charging stations (25.1%) are high on the agenda, reflecting growing demand for energy efficiency. In contrast, initiatives like waste reduction (5.5%), green roofs (3.7%) and water conservation (0.8%) received less attention, suggesting a focus on immediate, high-impact solutions over longer-term sustainability measures. 

Retail real estate set for strong year as investment demand rises 
 
Rightmove signals a positive year ahead for retail real estate, with commercial property investment demand surging following a cut to Bank Rate in February.  

Rightmove’s Quarterly Commercial Insights Tracker shows the sector has seen a 28% year-on-year increase in investment enquiries, while leasing demand rose by 6%.  

Retail is now ‘right-sizing’ to align with market needs, according to JLL, as vacancy rates stabilise and economic conditions improve. JLL’s research paper last year noted, ‘The investment market should also benefit from gradually increasing activity, as more investors seek to take advantage of the rebasing of real estate prices, and greater levels of stock on the market. Retail fundamentals appear strong in many markets, creating a powerful case for real estate investors to target the sector. The tide has finally turned, and a new era for the right type of retail has arrived.’ 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

All details are correct at the time of writing (19 March 2025) 

Advised investors are ‘less vulnerable’

Investors who receive financial advice are four times less likely to be vulnerable than the general population, according to analysis1. 

The study looked at a cohort of more than 5,000 advised investors, assessing them using a psychometric financial wellbeing questionnaire. Designed by an in-house behavioural psychologist, the questionnaire was designed to find and evaluate indicators of vulnerability across aspects such as health, life events, resilience and capabilities. 

Significantly fewer advised clients were found to be highly vulnerable, despite being affected by such events in similar proportions to the general population. 

Less impacted by adverse events  

For example, 41% of advised clients had a health condition or illness, but only 3% said these challenges reduce their ability to carry out day-to-day activities. Similarly, 30% said they’d experienced a difficult life event in the past 12 months, but just 3% showed high vulnerability by saying it prevented them from doing the things they want to. 

Advised investors also enjoy strong financial resilience, with six in 10 saying they feel they can cope with financial challenges. Very positively, almost half feel they are knowledgeable about financial matters, while almost eight in 10 said they were confident in their ability to manage their finances. 

1Dynamic Planner, 2024 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

News in Review

“The economy shrank a little in January but grew in the latest three months as a whole” 

The UK economy shrank unexpectedly in January, according to official data released on Friday by the Office for National Statistics (ONS). With a contraction of 0.1%, the economy fared worse at the start of 2025 than analysts had predicted, with the figure seen as a blow to the government ahead of its Spring Forecast later this month. 

Weaker economic performance followed a promising end to 2024, with growth of 0.4% recorded in December. The fall was driven mainly by a decline in the manufacturing sector, while oil and gas extraction and construction also had weak months. At the other end of the spectrum, services including retail recorded positive growth in January. 

Ben Jones, Lead Economist at the Confederation of British Industry, commented, “After a surprisingly strong performance in December, some pay-back was always a possibility in January. But the mixed picture across different sectors in recent months suggests the recovery is still fragile.” 

Boosting growth remains the government’s key priority and the negative data could complicate Chancellor Rachel Reeves’ plans on tax and spending, analysts noted. Responding to the latest growth figures, Reeves said, “The world has changed and across the globe we are feeling the consequences.” 

Liz McKeown, ONS Director of Economic Statistics, added, “The economy shrank a little in January but grew in the latest three months as a whole, with the overall picture continuing to be of weak growth.”  

Stamp Duty deadline dampens housing market 

The looming Stamp Duty Land Tax (SDLT) deadline could be stalling momentum in the housing market, according to the latest UK Residential Property Survey released last week by the Royal Institution of Chartered Surveyors (RICS). 

Buyer demand fell to a net balance of -14% in February, down from -1% in January, making this the lowest such reading since November 2023. Meanwhile, house prices continued to rise (+11%) but at a ‘subdued’ rate, the report noted, though most respondents still expressed the belief that prices would increase in the next 12 months. 

Simon Rubinson, RICS Chief Economist, commented, “The UK housing market appears to be losing some momentum as the expiry of the temporary increase in Stamp Duty thresholds approaches.” 

Side hustlers get tax allowance boost 

Some 90,000 people who work a ‘side hustle’ might soon be exempt from filing a tax return or paying any tax on their side earnings, Exchequer Secretary to the Treasury, James Murray, announced last week. 

The reporting threshold for trading income is likely to be increased from £1,000 to £3,000, a move that will see many people who earn extra fall under the limit. The government claims the move will ‘free up time for taxpayers helping to create the conditions for economic growth,’ but is yet to announce the exact date that the rule change will come into effect.  

Card spending slows but confidence rises 

UK consumer card spending grew by only 1.0% year-on-year in February, according to the Barclays Consumer Spend report released last week, a sizeable fall from January’s 1.9% increase and well below inflation. At the same time, however, confidence in personal finances soared to its highest level since the survey question began in 2015. 

In total, some 75% of consumers say they feel optimistic about their household budgets. Indeed, although essential spending fell in February, discretionary spending proved resilient with 2.1% growth, and spending in the retail sector grew, notably for electronics. Meanwhile, two in five consumers say they found ways to save money. 

Mortgage lending grows in Q4 2024 

Mortgage lending grew substantially in Q4 2024, the Bank of England’s Mortgage Lenders and Administrators Return has revealed, with the outstanding value of residential mortgage loans increasing by 0.5% to £1,678bn. 

As well as rising to the highest total amount since reporting began in 2007, the proportion of lending to high loan-to-income borrowers increased to reach a total of 45.8%. The release also revealed that first-time buyers now make up a market share of 29.6%, the highest since 2007. 

Stricter tests for Personal Independence Payments (PIPs) 

On Tuesday, Work and Pensions Secretary Liz Kendall announced changes to the welfare system aimed at saving £5bn by the end of 2030. She confirmed that payments will go up in line with inflation this year, but the eligibility criteria will be tightened up from November 2026. There will also be a review of the Pip assessment process. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (19 March 2025) 

Pension pulse – a reminder for ‘25

Aside from the change announced about bringing unused pension pots into IHT from April 2027, other announcements relating to pensions were thin on the ground during the Budget speech. 

The Chancellor confirmed that the State Pension will increase in line with average earnings, rising by 4.1% in April 2025. The new flat rate State Pension is expected to rise to £230.25 a week, the old basic State Pension is anticipated to rise to £176.45 each week. 

A reminder about current pension allowances and thresholds: 

  • The Annual Allowance (AA) threshold is £60,000 
  • The Money Purchase Annual Allowance (MPAA) and the minimum Tapered Annual Allowance (TAA) are £10,000 
  • The adjusted income threshold for the TAA is £260,000 
  • The Lifetime Allowance and charge have been abolished 
  • The maximum Pension Commencement Lump Sum (PCLS) is £268,275. 

A significant shift 

The end of the IHT exemption for pension pots will prompt some rethinking of retirees’ decumulation strategies as people focus on using their pension for retirement income rather than estate planning purposes. The Chancellor expects 8% of estates will be impacted annually. It really is a significant shift worth planning for. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

Now here’s a golden anniversary worth celebrating! 

It’s 2025 and we are celebrating the 50th anniversary of the Sex Discrimination Act which, amongst other measures, made it possible for women to get a mortgage without a man’s countersignature. 

It’s a great time to reflect on how far we have come in promoting financial equality between the sexes. In recent years, we have seen further strides. For example, the number of primary (or sole) female mortgage applicants increased from 29% in 2017 to 33% in 20211. 

It’s also a good time to consider the work still to be done  

The gender pay gap, which although narrowing, with many women needing a higher multiple of their annual salary to be able to purchase a home versus men, still presents a home ownership barrier to many women. 

Combine this with the cost-of-living and higher mortgage interest rates over the last few years, and it is unsurprising that many women feel that getting a mortgage is just as out of reach as it was in the 1970s. 

Advice is key 

Don’t be downhearted about your mortgage prospects – we are here to help you explore your options and ensure you have access to all the advice and information you need to make financial decisions with confidence. 

1Habito, 2022 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

End of tax year IHT recap – gen up on gifting allowances

Recent HMRC data shows that IHT receipts rose to £4.3bn during the period from April to September 2024, a £400m increase on the same period the previous year. 

With 27% of 18 to 34-year olds (1.1 million people) holding out for an inheritance before going ahead with major life events and 12% of UK adults regifting to their children, grandchildren, or other family members, here’s a reminder of the vital gifting numbers to gen up on before the end of the tax year: 

  • You can make gifts worth up to £3,000 in each tax year. These gifts will be exempt from IHT on your death, even if you die within the seven-year period that otherwise applies to lifetime gifts. You can carry forward any unused part of the £3,000 exemption to the following year but if you don’t use it in that year, the exemption will expire. 
  • Certain gifts don’t eat into this annual exemption and don’t give rise to IHT, e.g. wedding gifts of up to £5,000 for a child, £2,500 for a grandchild (or great grandchild) and £1,000 for anyone else. Individual gifts worth up to £250 per year per recipient are also IHT free. 

While these are relatively small sums, you should use these up where possible without compromising your own financial security, to gradually reduce your overall estate. A settled pattern of gifts from surplus income can also be made. Conditions apply, and advice would be needed to ensure that the gifts are made and evidenced in the right way. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

The changing face of retirement – as the traditional ‘hard-stop’ is consigned to history

Catalysed by the 2011 abolition of the Default Retirement Age, a combination of economic and socio-demographic trends are changing people’s outlook to retirement; and this, in turn, is heightening the need to adopt a more fluid approach to retirement planning. 

Carry on working  

Research1 suggests the traditional ‘hard stop’ retirement is increasingly being consigned to history, with 69% of UK adults now believing retiring in your sixties will become a thing of the past. Another study2 found that 41% of adults expect people never retiring to become the norm over the next 10- 25 years; this represents a sea change in opinion with comparable figures from previous studies on this issue around 13%. 

Mind the tax 

There are undoubtedly good reasons why people continue working beyond retirement age, not least the financial benefits. Some enjoy the sense of purpose or structure a job provides, while others see it as a way of keeping active and sociable. This trend to a more gradual transition from the world of work, however, does increase the need to carefully consider any tax implications associated with earning an income while potentially taking, or delaying, pension benefits, particularly in relation to tax brackets. 

Whenever and however you want to stop working, proactive preparation is the key to a happy and comfortable retirement. 

1Canada Life, 2Phoenix Insights, 2024 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

Could ‘right-sizing’ help the housing market?

With the UK housing market facing an array of problems, experts have suggested almost as many solutions. One concept that could help resolve the current shortcomings is ‘right-sizing.’ 

‘Right-sizing’ refers to the process of moving to a more suitable property for your requirements, generally one with fewer bedrooms. Closely related to downsizing, some analysts think that ‘right-sizing’ could be crucial to help FTBs get a foot on the ladder. 

Balancing the housing stock 

Amid falling supply and affordability concerns, purchasing a first home is a significant challenge for huge numbers of young people. Yet, some 85% of owner-occupied homes in England and Wales contain one or more ‘spare’ bedrooms, research1 shows. 

These unused rooms limit housing availability for families and younger buyers, which also creates a knock-on effect through the housing chain. “There are a lot of people in the UK who are sitting in houses that are bigger than they need,” commented Mark Arnold, Head of Savings and Mortgages at Barclays. 

Barriers to ‘right-sizing’ 

We all know that a house is more than a home. After living in the same place for many years, it is unsurprising that many people develop an emotional attachment to their property that makes them reluctant to move. For others, the imagined hassle of moving seems unappealing. 

To overcome these barriers, it is important to consider if your current home is meeting your needs. If you have more rooms than you need, it is likely there might be a better property for your circumstances. Moving would then help others by freeing up suitable housing across the whole market. 

1Barclays, 2024 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. 

News in Review

“February’s figures highlight the delicate balance within the UK housing market” 

The most recent House Price Index data from Halifax released on Friday showed an unexpected fall of 0.1% in February; a Reuters poll of economists had expected a 0.3% uptick in the month. 

Amanda Bryden, Head of Mortgages at Halifax said, “The typical UK house price remained stable in February… Annual growth held steady at +2.9%, with the average house price edging down by just £213 to £298,602. February’s figures highlight the delicate balance within the UK housing market. While there’s been talk of a last-minute rush on new mortgages ahead of the changes to Stamp Duty, inevitably we’ve seen some of the demand that was brought forward start to fade as the April deadline ticks closer, given the time needed to complete a purchase.” 

The data shows that Northern Ireland continues to have the strongest annual property price growth in the UK, largely unchanged at 5.9% in February, while house prices in Wales were up 2.8% compared to the previous year. Data for England shows that Yorkshire and Humberside recorded the strongest annual property price growth for the first time since July 2021, up 4.1% compared to the previous year. London saw annual house price growth ease considerably from 2.6% in January to 1.6% in February. The capital still has by far the most expensive average property price in the UK at £545,183. 

Pivotal meeting in Brussels 

Last Thursday, 27 European leaders congregated in Brussels to attend talks to discuss defence spending. President Zelensky was present and keen to voice his appreciation for the support received from the bloc leaders. The President of the European Commission, Ursula von der Leyen, referred to the meeting as a “watershed moment.” She continued, “It’s so important that we stand together. Ukraine is part of our European family… Europe faces a clear and present danger, and therefore it must be able to protect itself, defend itself.”  

Following the session, a statement on the European Council’s website outlined, ‘The European Union will accelerate the mobilisation of the necessary instruments and financing in order to bolster the security of the European Union and the protection of our citizens.’ 

Trump tariffs 

Tariffs of 25% imposed by President Trump on steel and aluminium imported to the US took effect from Wednesday. In response, the EU said it would impose counter tariffs on €26bn (£21.9bn, $28.3bn) worth of US goods. 

Global stock markets responded- the S&P 500 Index fell a further 0.7% on Tuesday after dropping 2.7% on Monday, which was its biggest one-day drop since December. 

Canada’s next PM vows to win trade war  

Canada’s ruling Liberal party announced on Sunday that Mark Carney had won the contest to replace Justin Trudeau as party leader and Prime Minister. Despite a lack of political experience, never having served as an MP or cabinet minister, Carney brings a wealth of economic expertise as a former Governor of both the Bank of Canada and the Bank of England. 

Carney’s campaign focused on standing up to President Trump, who as well as imposing tariffs, even suggested making Canada America’s 51st state. Addressing his supporters, Carney firmly rejected this notion, declaring, “Canada never, ever, will be part of America in any way, shape or form.” He vowed to maintain retaliatory tariffs until the US respects Canada’s sovereignty. 

Spending cuts in the pipeline 

Ahead of the Spring Forecast on 26 March, the Chancellor is said to be considering significant departmental spending cuts, including to welfare. The proposed reductions have been submitted to the Office for Budget Responsibility (OBR), who have been commissioned to provide an Economic and Fiscal Forecast which will be published on 26 March, and presented by Rachel Reeves, alongside a statement to Parliament. 

During the Autumn Budget, the OBR indicated availability of £9.9bn for spending. Their upcoming forecast is expected to show this fiscal headroom has diminished due to a combination of factors including higher inflation and borrowing costs. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (12 March 2025) 

News in Review

“We have a chance now to do the same for the 21st century” 

A trade deal between the UK and US could be agreed “very quickly,” President Donald Trump said at a White House press conference with Prime Minister Keir Starmer.  

The President suggested the UK may avoid the tariffs imposed on other trading partners, raising hopes of a favourable agreement. The Prime Minister presented President Trump with a formal invitation from King Charles for a second state visit, which Trump called a “great honour,” praising the King as a “wonderful man.”  

The Prime Minister signalled that artificial intelligence presented a great opportunity for both countries, saying, “Instead of over-regulating these new technologies, we’re seizing the opportunities that they offer. We’ve decided today to go further to begin work on a new economic deal with advanced technology at its core. Look, our two nations together shaped the great technological innovations of the last century. We have a chance now to do the same for the 21st century.” 

Later in the week, after a tense meeting with Trump, Ukraine President Volodymyr Zelenskyy visited London and Starmer announced a four-step plan to guarantee peace in Ukraine, saying Europe must do the “heavy lifting.”  

On Tuesday, an announcement came from the Trump administration that delivery of all US military aid to Ukraine was to be suspended. Later on Tuesday during his first address to Congress since returning to power, Trump said he received a letter earlier in the day from Mr Zelenskyy, saying he was ready to sign a proposed critical minerals deal between the two nations. 

UK house prices hold steady in February  
House prices rose 3.9% year-on-year in February, slightly below January’s 4.1% increase, according to Nationwide. Prices also edged up 0.4% month-on-month, marking a sixth consecutive monthly gain. 

Despite affordability pressures, the housing market remains resilient. Sales transactions in late 2024 were up 14% on the previous year, though still 6% below pre-pandemic levels. First-time buyer activity continued to recover, with mortgage completions just 5% lower than in 2019, despite higher interest rates. Cash buyers remained strong, with transactions now exceeding pre-pandemic levels. 

FTSE 100 ends February at record high  
The FTSE 100 closed at an all-time high of 8,809.74 at the end of the month, shrugging off market jitters over Donald Trump’s latest tariff threats. The pound also remained strong, posting its best month against the dollar since September. 

Brent crude dropped below $73 a barrel. Markets were unsettled after Trump brought forward 25%    tariffs on Mexico and Canada and doubled tariffs on Chinese goods.  

UK car production slumps amid “perfect storm” 
Car production in the UK fell by nearly 18% in January as the sector faces weakening demand, global trade uncertainty and delays in new model rollouts. Factories produced 71,104 cars and 6,908 commercial vehicles, down almost 16,800 units from last year, according to the Society of Motor Manufacturers and Traders (SMMT). 

SMMT Chief Executive Mike Hawes warned of a “perfect storm” of challenges, making the transition to electric vehicles harder. The downturn has already triggered job losses, with Aston Martin cutting 5% of its workforce and BMW pausing a £600m upgrade to its Mini plant in Oxford. 

Government backs Gatwick’s second runway pending noise reduction measures 
The government has given provisional approval for Gatwick Airport’s second runway, provided noise reduction measures are included. Transport Secretary Heidi Alexander was “minded to approve” the £2.2bn project, though planning permission is still required. 

Gatwick plans to reposition its northern runway, currently used for taxiing, to make it operational by the end of the decade. If approved, construction could start immediately, funded through private                investment. The expansion faces opposition from MPs, local authorities and residents, with a final       decision expected in October after further consultation. Gatwick Chief Executive Stewart Wingate       welcomed the announcement, saying the government had provided a “clear pathway to full approval.” 

Retail sales slump continues as sentiment remains low 
Retail sales fell for the fifth month in a row in February, with a sharper decline expected in March, according to the CBI Distributive Trades Survey.  
 
Retailers remain pessimistic, cutting jobs and scaling back investment at the steepest rate since 2019. Sales for the time of year were weaker than usual, and overall confidence remains low. The downturn has also hit wholesale and motor trades, with total distribution sales falling sharply. While the pace of decline may ease slightly in March, businesses remain cautious as tough market conditions continue. 

 
Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (5 March 2025)