Investment Market Update 2025

UNTIL RECENTLY, THE MANTRA IN THE INDUSTRY WAS ‘STAY ALIVE UNTIL ‘25’ – BUT THE MARKET IS UNLIKELY TO DELIVER SALVATION FOR EVERYONE THIS YEAR.

While interest and risk-free rates are definitely on a downward trend, and inflation may undershoot expectations, the easing has been much slower than many had hoped for. Economic disruption caused by international political tensions are a further limiting factor.

However, 2025 will almost certainly see an increase in activity and some downward pressure on yields. Property – an unfashionable asset for a few years at a global level – will look more appealing generally, although this may be accompanied by a distinct ‘risk off’ approach given events. Even if the fundamentals (and risks) are shifting a little, the evident demographic and trend headwinds for ‘beds and sheds will keep them in the limelight as favoured sectors. The appetite for retail warehousing and urban logistics, in particular, has remained phenomenally strong.

The continued – if gradual – ‘return to the office’, and the evident recovery of some parts of the office market, suggest that 2025 and 2026 could be marked by a greater, if highly selective, interest. As this would likely be focused on city cores and high-quality space, it would further polarise an already polarised market. But it is the living sector where political, demographic and property market fundamentals are converging most favourably. Moderate downward pressure on yields and a stabilisation in build costs should make some projects more viable, leading to an improvement in construction activity, particularly in the residential sector.

While 2025 will be another year of gradual improvement – albeit not one without somewhat heightened risks – those hoping for a full-on recovery may have to wait until 2026.

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