What is Slowing Down Commercial Property Transactions in 2025?
Ever changing interest rate predictions and market uncertainty are just the tip of the iceberg.
Between 2017 and 2023, the total value of commercial property transactions in the UK decreased by an estimated 49%, from £104 billion to £53 billion, according to Search Acumen.
2024 saw a resurgence in investment, especially in the retail sector. Investors allocated a total of £2.07 billion to UK shopping centres, which is the highest investment level since 2016, reports The Times.
And while the commercial market looks to be on the rise, recent factors like increased interest rates and market uncertainty under the new Labour government are slowing down commercial property transactions in 2025.
Wildbrook asked various interprofessional key people about their thoughts on why transactions are moving at a slower pace, and the below summarises the outcome.
This article will cover:
- How lawyers and agents are slowing down transactions
- Why legal teams are often described as a bottleneck
- The role of agents and extended timelines
- The problem with pricing in the current market
- Financing from the banks and how it slows down commercial transactions
The uncertain economic landscape.
Since the US Presidential Inauguration in January, the global financial markets have started to settle following an immediate rise then a sharp decline in rates. It seems that the commercial real estate market is equally susceptible to ‘Trump Tweets’ as the money markets are, and that one evening a portfolio could be looking well and the following morning the value or liquidity of the portfolio could be less positive due to an irrational X (formerly Twitter) post from the US president.
The International Monetary Fund (IMF) has today announced however that “an economic recovery is underway” in the UK. As the UK was the fastest growing economy in the G7 for the first three months of this year, the IMF has upgraded the growth forecast.
The IMF expects the Bank of England to cut interest rates by a quarter of a percentage point once a quarter until they reach a level of around 3%, down from 4.25% currently. However, markets are currently pricing in just half a point of cuts over the next year.
Today it feels like there is more than a positive outlook for the UK economy and this will help put a spring into the step of property investors, although we also keep an eye out for what tomorrow may bring. Caution and hesitation are key themes, but this is not overly negative and in theory should always be applied in any case when assessing an investment opportunity.
Planners and strained local authorities.
Cuts to local authorities have resulted in under-resourced planning departments, leading to delays in producing local searches.
For example, Labour’s housebuilding pledge has been derailed due to a staff shortage, with some councils facing staff vacancy levels of almost 50%, as reported in an article from The Times.
With fewer staff and increased workloads, the time required to complete these searches has grown, frustrating buyers and sellers.
The lawyer bottleneck.
Legal teams are often (fairly or unfairly) flagged as a major slowdown of commercial property transactions.
There are several factors contributing to this:
- Point scoring: Anecdotal reports suggest that some lawyers engage in unnecessary back-and-forth negotiations, which reduces traction and elongates deals.
- Legal professionals are under-resourced and overworked: many legal professionals are taking on more cases than they can handle. Challenges in recruiting experienced staff compound this.
- Shift to hybrid working: The shift to remote and hybrid working post-pandemic has sparked debates around productivity. However, there is little research to say lawyers are less productive working from home. Research into the correlation between hybrid working and productivity in the legal sector could provide valuable insights.
- Lengthy lease documents: the longer a commercial lease takes to sign, the more chance the deal has of “falling out of bed.” It seems tenants would prefer a more streamlined lease to allow negotiations to be agreed much more quickly.
Addressing these inefficiencies within legal teams would potentially improve workload management and help streamline commercial property transactions.
What’s happening with agents?
Commercial property agents also play a pivotal role in transaction timelines. However, post-COVID market dynamics and hybrid working trends may have reduced their activity level.
Some concerns include:
- Agents rely too heavily on lawyers once a deal goes under offer, instead of actively pushing transactions forward.
- A potential lack of urgency or drive may stem from market uncertainty and reduced face-to-face interactions (this ties back to the hybrid work situation).
- Lack of data available at the outset. It is much easier to complete a transaction quickly when there is a data room available with title information, leases and other supplementary documents. A technical building survey report prepared by a seller for a buyer to have reference to is also a time saving manoeuvre which can also help to reduce the conditionality within a set of Heads of Terms.
Agents who proactively manage deals and maintain close communication with all parties are likely to achieve faster and more successful outcomes.
Occupier Delays.
Different segments of the occupier market have different drivers and move at different speeds.
Occupiers remain active but are driven by more strategic reasons than business growth alone. In turn, this is leading to deals taking longer to complete.
Are owners and sellers realistic about pricing?
Property owners and sellers can unintentionally delay transactions by being inflexible or failing to provide necessary information.
The main issue here is unrealistic pricing expectations. This can deter buyers or prolong negotiations. Again, the longer a deal takes, the more likely it is to fall through.
Moreover, if sellers are not providing sufficient information, buyers cannot undertake full due diligence.
If sellers can adopt a more realistic pricing strategy aligned with the current marketing conditions, and both parties can prepare documentation for sale, this would facilitate smoother transactions.
Are buyers sticking to completion timescales?
It should come as no surprise that buyers can also contribute to transaction delays. Often, this is a result of failing to adhere to completion timescales.
Other factors may include:
- Pushing for extensive due diligence or renegotiations to secure better terms in a buyer’s market.
- Delays in securing financing or approval from lenders.
While buyers are naturally inclined to negotiate favourable terms, a more rigid timeline set in stone would benefit all parties involved to help deals go through quickly.
The financing hurdle… the banks
For buyers seeking debt financing, banks are often seen as a stumbling block.
The process of securing funding involves multiple steps, including:
- Lengthy approval processes.
- Additional delays from property valuations by bank-appointed surveyors.
- Tight lending criteria that may deter borrowers.
Improving communication and streamlining the financing process could help reduce transaction times for buyers relying on debt.
Are valuers being overly cautious?
Property valuers play a critical role in determining market value, but a cautious approach can lead to delays.
Many valuers rely heavily on historical data rather than leveraging expertise to predict future trends.
While prudence is essential, an overly conservative approach may slow the transaction process unnecessarily.
Holidays.
This one came up today in conversation. The length of holidays now seems to have doubled. Easter is a two week break when taking into account different areas of the UK having different holidays meaning a lengthy crossover of absentees. Summer holidays start in early June and finish mid September – with some privileged agents actually taking off (pretty much) this entire period. The Christmas season starts late November and ends mid January, so in theory there could only be around 4 months of fully loaded focus and efficiency across a calendar year.
Key Takeaways
- Cuts to local authorities have caused delays in local searches
- Anecdotal reports suggest lawyers engage in unnecessary back-and-forth negotiations, which reduces traction and elongates deals
- Owners and sellers are not realistic about pricing in the current market
- Buyers are not sticking to timescales
- Financing from the banks adds lengthy delays
- Valuers are potentially being overly cautious
Changes to the commercial property market will not happen overnight. But if some of the factors mentioned above can be addressed, commercial property transactions are likely to increase.
Please get in touch if you have a commercial property requirement or if you are looking to sell an asset. We are always available for a chat in person or over the telephone.
