The property market is entering a period of transformative change in 2025. Driven by sustainability mandates, technological advancements, and evolving space requirements, investors, developers, landlords, and occupiers must adapt. To stay ahead in this dynamic environment, understanding the emerging trends will be key. Read more from our Heads of Division on how we can help you with your property needs in the year ahead.
ESG and sustainability will continue to play a vital role
Looking to the year ahead, despite slower than expected interest rate cuts predicted, mortgage rates are expected to decrease, with several lenders starting the new year by competing to cut rates, which will be welcome news for borrowers. In turn, Zoopla is expecting house prices to increase by 2.5% over 2025 with sales completions expected to rise to 1.5 million.
Across the commercial property sector, and particularly offices, ESG and sustainability will continue to play a vital role when attracting tenants and investors. Corporate office tenants now expect the space they occupy to hold a minimum EPC rating of B, and properties falling short may suffer periods of vacancy and obsolescence. Office owners can mitigate this risk by ensuring they have a business plan in place to improve their property’s EPC rating and potentially investigate a change of use of more secondary office buildings.
Our valuation team is made up of 32 experienced registered valuers located nationwide, meaning we can provide property valuation advice across the UK. We provide valuations for a range of purposes including loan security, accounting, probate, and tax purposes, as well as for property purchases and disposals. The AR team are always happy to have a conversation to see how we can help so please get in touch for a friendly chat.
Michelle Campbell, Head of Valuations.
Policy Reforms Will Unlock Development Potential
Changes to planning regulations and sustainability policies are reshaping the development landscape.
Changes to policy and renewed housing delivery targets are creating opportunities for urban regeneration and infrastructure-led growth. Projects that fail to meet environmental standards may face delays and additional hurdles. New guidance on the use of so-called “grey belt” land may create opportunities in parts of the Green Belt, potentially facilitated by Green Belt reviews by some local authorities, upon which further guidance is awaited. Grey belt land does not simply refer to previously developed land but also includes undeveloped parcels that do not contribute significantly to certain aims of the Green Belt. The increased housing targets may also lead to a call for sites from some authorities, creating opportunities for landowners – both promoting land for development and those wishing to redevelop brownfield sites.
Staying informed about policy changes and ensuring projects meet sustainability requirements could be crucial. Focusing on urban regeneration and brownfield development might align with both market demand and government priorities. Engaging with local communities and stakeholders early in the planning process could ensure support and smooth project execution.
Duncan Thomas, Head of Planning and Development
Continued Flexible office spaces in London Commercial Agency
Hybrid working is here to stay for the foreseeable future, with most employers recognising the more flexible work model and making accommodations for its implementation.
Workplace experts are advising that employees will continue to work between 2 and 3 days a week in an office while some employers are pushing for between 3 and 4 days a week. What is clear from our perspective is that the workplace must adapt and by not doing so gaps across the office sector will remain widespread.
The central London market saw a huge increase in the flexible office during 2024 and this will continue throughout 2025. The physical differences between the flexible office suites and the conventional Cat A office space are:
- Furnished with desks, chairs, soft seating, and kitchen utensils.
- Fitted with meeting rooms and private booths.
- A fully fitted kitchen.
- Leased fibre lines and fully live.
Another significant difference is the ability to provide tenants with a fully inclusive license agreement, allowing for an immediate move in date. We note that in return for the additional capital expense by the landlord the return on the investment is almost immediate.
In response to this trend, we will be advising our clients on how best to maximise their returns across their portfolios, leveraging technology to achieve these higher returns.
Gerard Barry, Head of Transactional and Capital Markets
Industrial Open Storage as an Asset Class
This is a trend that we see continuing throughout 2025 as investors pursue revenue growth and capital appreciation over time and reversionary development opportunities in industrial friendly locations.
Overview of Industrial Open Storage (IOS)
- Last year’s occupational demand levels increased by 23.78% year on year
- Majority of demand sub 2 acres
- Demand is typically increasing due to high HGV and EV charging facilities.
- Occupier demand typically requires; Surfacing (more value with Hardcore), Services (power and water required for cabins), Fencing (required for most occupiers), Unrestricted B8 (needed outside of business hours)
- Rents have continued to grow. London 9.5% on last year and 2.1% increase regionally.
- Class one rents – highs of £10 per sq ft at major locations such as Park Royal, Heathrow, Slough. Lows of £5 per sq ft for Dartford and Barking / Dagenham
- Average regional rent is £2.75psf with a high of £3.75 psf in Birmingham, Manchester, and Southampton / Portsmouth.
- Market yields; London 5.4% and Regional 6.9%
The Hertfordshire Market
Offices
Offices have seen a flight to quality yet overall, the market remains slow, with smaller deals more prominent. Despite that, many owners are looking to exit the market via the Permitted Development route and properties are being sold for residential conversion. We anticipate this trend will reduce the overall stock and accordingly create shortages in some sections. As a result, we expect this will force increases in rents and prices or at least we should see a reduction in the current levels of incentives.
We are increasingly engaging with our landlords, providing advice on what tenants are looking for, including design ideas, amenities, and flexible lease terms.
Industrial
Rental growth and competition for prime space may drive some occupiers to explore further afield for availability and cheaper occupational costs. Industrial rents are now hitting £20 per sq ft plus in North West London and £30 per sq ft plus in Park Royal, with Hemel Hempstead achieving £23 just recently.
The development pipeline will shift to locations of lower land values but for now the region remains strong with rental growth likely to improve further this year while supply will continue to fall.
Retail
This asset class is very location specific, with some strong typically market towns continuing to do well, whilst other places face significant challenges. Large High Street units continue to struggle, but secondary and tertiary retail are generally holding up for now.
Read more on our Commercial Agency services or search available properties here.
Mark Bunting, Regional Director
Building Surveying
Meeting Evolving Client Demands with Sustainability at the Forefront
In 2025, when it comes to Building Surveying, we expect to see a focus on core disciplines with Sustainability and ESG playing a pivotal role in shaping clients’ requirements. Key service areas likely to see strong demand include:
- Acquisition surveys: Comprehensive evaluations of commercial properties, with particular attention to EPC ratings and energy efficiency becoming increasingly critical for investors and occupiers.
- Design and project management: The healthcare sector, particularly primary health, and medical centers, is set to remain a significant area of growth, driven by ongoing demand for modern, efficient facilities.
- Residential valuations: Services related to court proceedings, inheritance tax, capital gains tax, probate, and Help to Buy schemes are expected to continue attracting interest, reflecting common search trends and client needs.
Construction costs will continue to rise, and this will have an adverse effect on construction starts while values trend sideways.
Healthcare Market: Steady Growth and Renewed Momentum
Rental growth in the healthcare market has been consistent nationwide, though the process of progressing rent reviews and Notional Rent appeals remains slow. This is largely due to understaffed Integrated Care Boards (ICBs) and District Valuer’s offices, which assessments, and negotiations. Growth continues to be seen on properties of all ages and specifications, with higher levels being consistent with more modern high specification premises, as opposed to smaller converted premises. More reviews than ever before are going through Local Dispute Resolution Procedures (LDRP) and beyond this stage to NHS Resolution.
At lease renewal, ICBs can be reluctant to approve longer lease terms of 15 to 20 years without capital expenditure and modernisation of premises in line with latest NHS Guidance. These can range from minor upgrades to more substantial improvement works and extensions, with grant funding available in some cases. Investor preference remains a minimum of 15 years, and this is achievable in many cases.
The newly released NHS Directions 2024 provide additional Guidance on funding and abatements, timescales for acceptance of rent assessments and procedures relating to rent review processes. Interpretations of the requirements of this Guidance vary between ICBs, which we expect to see further clarity on in 2025.
In terms of value, the primary healthcare market has historically been very stable with high levels of demand outstripping supply due to NHS backed income and low risk of Tenant default. The market peaked close to the end of 2021, with yields reaching an all-time low, combined with rental growth maximising investment value. From then until late 2024, investor demand dropped off with economic instability with almost no deals completed. Transactions are now completing over the last 6 months or so and we are seeing renewed activity and interest in the market, albeit at adjusted levels of value, and 2025 is expected to start to see increased sales activity.
Paula Mace, Head of Healthcare
Business Rates Reforms on the Horizon
The Labour Government’s Autumn Budget introduced a discussion paper titled Transforming Business Rates. Within this document, the Government committed to developing a “fairer business rates system that safeguards the high street, encourages investment, and meets the needs of the 21st century.” Stakeholders were invited to provide input on how the Government could implement meaningful reforms to the business rates system here, more information can be found here – http://bit.ly/4gUCnnE.
The Autumn Budget 2024 also introduced a series of immediate measures to the business rates system:
- Freezing the Small Business Multiplier: The small business multiplier will be frozen at 49.9p for the 2025/26 tax year.
- Adjusting the Standard Multiplier: The standard multiplier will be uprated in line with the Consumer Price Index (CPI), increasing from 54.6p to 55.5p, resulting in increased rates bills for any property with a rateable value above £51,000.
- Extending Relief for Retail, Hospitality, and Leisure: The Retail, Hospitality, and Leisure (RHL) relief scheme will be extended for another year, with a reduced relief level of 40% down from 75% and capped at £110,000 per business. This will inevitably lead to significantly increased rates bills from 01/04/2025 in these sectors.
- Ending Charitable Rate Relief for Private Schools: From April 2025, private schools will no longer be eligible for 80% charitable rate relief, except those primarily serving pupils with Education, Health, and Care Plans.
These changes may affect your business rates bill from 01/04/2025, so please get in touch if you would like us to discuss how you may be impacted.
The Valuation Office predicts a huge spike in appeal submissions at the end of the rating list (01/04/2026), which will lead to a backlog of cases for the VOA to work through. At Aitchison Raffety we are looking to submit appeals as early as possible, to get ahead of the game and work with our colleagues at the VOA. The appeal system is a minefield and making a mistake can easily lead to increased business rates liability, so it is advised you appeal through a reputable agent. The sooner you review your 2023 rateable value, the more likely it will be dealt with in a timely manner and investigated thoroughly; therefore, we advise you to act now!
Joe McCarthy, Head of Business Rates
Navigating the 2025 Property Market
To thrive in 2025, success will hinge on expertise, flexibility, and innovation. Embracing sustainability, leveraging technology, and adapting to market changes will be crucial to achieving growth. By understanding these shifts, you will be well-positioned to lead in a smarter, more sustainable property landscape.
We are Here to Help!
Whether you are navigating changes in the residential, commercial, or healthcare property sectors, our team is here to guide you through every stage of your property journey. Ready to explore how we can support your project? Get in touch for an informal chat today: Contact Us