UK CRE: A reminder of what we saw in the first half of 2025

As we approach the end of Q3, it is worth pausing to reflect on the trends that shaped the first half of the year. Our Q2 2025 Real Estate Navigator reveals both signs of resilience and clear reminders that uncertainty remains.

Global and UK Outlook: Clarity forming following tariff turbulence

The global mood improved during the first half of the year, though headwinds have hardly disappeared. In the UK, the economy edged closer to stability, seeing a recent upgrade by the IMF.

Detail within the data shows some optimism for capital markets in the second half of 2025

The UK reaffirmed its status as the most invested European market for overseas capital in Q2. Cross-border inflows reached £4.9 billion, a slight dip on the previous quarter, yet they still accounted for nearly half of total UK commercial real estate volumes. Look beneath the headline figure, however, and momentum is striking. Investment into core sectors jumped 59% year-on-year in H1, pointing to a resurgence of confidence.

Office fundamentals improving throughout the UK

UK regional cities saw leasing reach its strongest first half in three years, with professional services and tech firms driving demand. The South East delivered its best H1 performance since 2008, reflecting sustained appetite for top-tier space. London told a more nuanced story: strong leasing in the Docklands and Stratford, large prime pre-lets boosting the City and Southbank, while the West End lagged slightly but carried promise with assets under offer.

Industrial momentum and evolving retail dynamics

Industrial portfolios kept the investment market moving in Q2, though scarcity of stock constrained deal flow. Occupier demand is strengthening, but availability of larger units is tightening. Retailers meanwhile navigated rising costs, uneven consumer demand and muted investor appetite, leaving the sector under pressure.

Pockets of optimism evident in specialist sectors

Data centres continued to gain government backing through AI initiatives and the UK Compute Roadmap, even as local planning objections were overruled. Healthcare assets proved attractive to overseas investors, highlighting the need for future-proofed stock. Life sciences remained a hotbed of activity, with resilient venture capital flows and a strong H1 for take-up across the Golden Triangle despite a softer Q2.

Looking ahead

With Q3 nearly behind us, the market enters the final stretch of the year with cautious optimism, steady demand for prime assets, and no shortage of strategic decisions still to be made.