T
he UK remains the top destination for real estate investment in Europe, despite a decline in transactional activity over the past two years. According to Cushman & Wakefield's 'Visions' report, key sectors such as healthcare, hospitality, and retail have shown impressive levels of activity.
Offices remain a major focus, with London's office market identified as the most liquid globally. Rental prices for high-quality office spaces have increased due to strong demand, pushing new or refurbished assets to 68% of all leasing activity in central London markets. Prime city rents are forecast to rise by 4.4% annually through 2028.
The experiential leisure market has seen significant growth, with investments increasing by 250% from £64 million to £225 million over the past two years. This trend is expected to continue, driven by revenue from live sports and music events. Spending on hotel accommodation also jumped 250% in 2023-2024.
The UK's commitment to achieving net-zero emissions by 2050 is driving investment in sustainable real estate. However, meeting new energy efficiency standards could cost £71 billion, posing significant challenges for investors. Despite this, ESG-focused strategies are gaining momentum, with funds targeting ESG improvements accounting for 23% of total U.K. & Ireland real estate investments in 2023.
The increasing adoption of AI is expected to reshape the real estate market, driving demand for data centers and influencing investment decisions. Cushman & Wakefield remains positive about the future of the UK real estate market, predicting favorable conditions for investors in 2025 due to key policy developments, ESG agenda dominance, technological advancements, and consumer recovery.
"We are positive about the market in 2025," said Daryl Perry, head of research & insight at Cushman & Wakefield. "Our analysis shows that the real estate sector will continue to adapt to ongoing structural changes, like AI, technology, decarbonisation, and societal and geopolitical fluctuations."
