After previously becoming nauseous yet immune to the inflation ticker, interest rate conversation and employment and economic growth stats, we started this year with slight optimism – despite an underlying fragility around the new Labour government and the potential for Mr Trump and his not so merry band of Tariffs.
Results of the Q4 2024 RICS UK Commercial Property Monitor showed that over half of the respondents believed that the UK property market had either ‘reached the bottom of the current cycle’, or is in the early ‘upswing stage’ of the next. We believe it was a mixture of the two, and echoed by a number of our opportunistic, cash laden clients.
Following this, the recent Q1 2025 RICS Commercial Property Market Survey confirmed ‘faint signs’ of improvement being visible in some areas with office and industrial sectors seeing a marginal increase in occupier demand. For investment, enquiries increased during Q1 2025 amid stable credit conditions, with prime office and industrial properties expected to deliver solid growth in rents and capital values over the course of this year, while many alternative sectors also display positive projections.
Since this, the Bank of England last week lowered interest rates to 4.25% in a move that real estate experts say, “will unlock property decision making” – Give us the keys!
It seems that we are moving through Q2 2025 with more belief, optimism and in line with the recent sunny weather… with a little bit of consistency (unlike at MIPIM this year).
The main investment market in Q1 2025 in the UK has been subdued to previous years, without surprise.
UK commercial real estate investment transactions totalled £8.9bn in Q1 2025, bringing the 12 month total to £52.4bn.
The £8.9bn transacted in Q1 2025 is 27% lower than in Q1 2024.
The Office sector saw the most investment during the quarter, followed by Living and Industrial.
This is quite satisfying given that in our ‘Looking ahead to 2025’ section of the New Year blog post, Wildbrook predicted that offices would perform well in 2025 and would even experience yield compression for best in class assets, (tick!).
Some key Q1 2025 deals in the North West were as follows:
- Capital Building in Liverpool acquired by Oval Real Estate for £56m which reflects an 11.30% NIY and capital value of £144 per sq ft. Tenants included UK Government, Royal & Sun Alliance, NCP and Tesco.
- The Slate Yard, a portfolio of three build-to-rent multi-family buildings in Salford, was acquired from L&G by KKR and Inhabeo for more than £100m. The scheme has strong sustainability credentials and consists of 424 residential units across three properties, totalling 270,000 sq ft.
- Tritax Big Box REIT acquired a 650,000 sq ft Sainsbury’s distribution centre in Haydock in an off-market deal for £75 million. The transaction represents a net initial yield of 6.00% and capital value of £119 per sq ft, acquired from Mutual Finance Limited which they acquired in 2008 for £42.8m.
Wildbrook have been active during Q4 2024 and Q1 2025, with investment sales and acquisitions completing during this period. From industrial HQ sites, to multi-let office buildings and single let warehouses, all across the region.
Recently we completed on a third consecutive acquisition at a popular industrial park in the North West. This rounded off a trio of industrial investment transactions, all off market, from three separate owners and on behalf of three separate clients. The assets total 263,959 sq ft and each asset was occupied and fully income producing, all below market rental value.
We have a number of existing sales and are developing a small pipeline as we look forward to the remainder of Q2 and the rest of this year.
The ’off-market’ transaction is still our preferred route of action, however, success has also been found with marketed assets on both the buy and sale side.
It was always going to be the case that investors could only soak up news stories of other investors buying assets at discount for so long, until there comes a point when decision making needs to start happening again.
With interest rates now being lowered and forecast again to do the same by 25bps at the next Bank of England meeting, we expect confidence combined with onset pent up demand to head towards a brimming point by the end of the summer allowing for a high fuelled period of activity in Q3/Q4 of the year.
Here’s to Q2!
