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The commercial real estate market is expected to exceed £50 billion in transaction volume in 2024, despite global political uncertainties.
This growth is driven by an “office-curious” investment market, which reflects increased investor interest in office spaces. BNP Paribas Real Estate forecasts that total transaction volumes in 2025 will rise by 5%, reaching £53 billion, with interest rates expected to moderate to around 3.75% and inflation running at about 3% by the end of the year.
In 2024, UK office transaction volumes totaled £9.5 billion, marking a 6% decline compared to 2023 and a 56% drop from the 10-year average. However, other commercial real estate sectors saw more positive performance, with overall volumes rising by 32%, aligning with the 10-year average, according to BisNow.
Retail investment is gaining renewed interest after years of being less popular, but the industrial and logistics markets remain strong. In 2024, industrial and logistics investment grew by 13% compared to the previous year, staying close to the 10-year average. Despite concerns about the potential effects of tariffs on manufacturing, the sector remains resilient.
Looking ahead, 2025 is expected to continue the trend of mergers and acquisitions in the industrial and logistics sectors, with fewer large players dominating the market. Much of this will depend on how quickly interest rates are reduced. BNP Paribas also forecasts that European real estate refinancing needs will be lower than €15 billion in 2025, but will increase to around €27 billion in 2026, signaling further consolidation in the market.
Overall, while the cost of debt and high interest rates posed challenges in 2024, demand for lending in the real estate market remains strong, and the trend toward larger, cross-border deals is expected to continue into 2025.
