Unlocking the Best Commercial Property Opportunities in 2025
This article was first published in Property Investor News, December 2024
With interest rates remaining high, albeit on their way down, and business and investor confidence still shaky following the Autumn Budget, it is difficult to see a dramatic revival of prices in the commercial property market in 2025.
Of course, this is great news for investors who still want to take advantage of the Window of Opportunity in the UK commercial property market. However, if there is one thing that is true, it is that it is dangerous to generalise about the market. There are still going to be some great buying opportunities in 2025, but these will be very property and location specific. The difference between ‘good’ and ‘bad’ investments will still be dependent on properties’ location and sector, and their size and configuration. This is why niching remains the only ‘game in town’ when investing in commercial property. In a nutshell, the trick to successful investing is to find those locations where tenant demand for units exceeds the supply of suitable units they could occupy.
The best opportunities in 2025, therefore, will come from understanding your investing locations better than most, and building great relationships within them.
However, I have dusted off my crystal ball, and have highlighted below some sectors where I think there may well be some great opportunities to make money in 2025.
1. Offices
There is a ” race to prime’ in the UK office market. What that means is that blue-chip operators are wanting to occupy only ‘Grade A offices’ – highly spec-ed offices which contain the right environmental and renewable credentials. Large second-hand office space now has very limited demand as there are few large tenants who wish to occupy this volume of space. It is even difficult to let these offices on a floor-by-floor basis, as the footprints are too large. This is of course primarily fuelled by Covid and the ensuing changing requirements for office workspace.
As leases expire on second-hand office space, they are being sold at vastly reduced prices from where they were priced at their peak – in fact many of them are ending up in auction catalogues. If you had to put me on the spot, I would say this is one of the best opportunities in the commercial property market at the moment and is certainly the only commercial sector where prices still seem to be falling.
The opportunity arises by reconfiguring and repurposing offices either for a change of use (both commercial and residential) and / or by sub dividing the space into small suites for a huge variety of alternative uses such as beauty therapists, small health uses, SME workspace etc. Many of my clients who work in this space, are regularly doubling capital values on second hand offices by doing this very thing, and some of the commercial lenders are very aligned with this strategy as the multitude of tenants that result mitigates much of the lending risk.
2. Retail
Whilst the masses continue to think that ‘retail is dead’, there are pockets of retail that are thriving nationwide. The trick is to sniff these out! Tell-tale signs include:
- Small high streets
- Full / high occupancy of shops#
- High footfall
- Good tenant mix with brands well represented, OR a high density of small niche operators
- Longer leases being granted (5-10 years)
- Good socio economics (look out for big houses locally) – although there are some retail locations that still thrive even if they have lower socio economics as the people in the catchment ‘shop local’
Prices remain subdued in many investing locations, so if you can find pockets of retail where there is still strong tenant demand, then it’s likely you can increase value, particularly if you can let vacant properties.
The retail sector is also witnessing a resurgence in other specific formats:
- Experiential Retail: Properties that offer interactive and engaging consumer experiences.
- Retail Warehousing: Stores combining online and physical shopping experiences.
3. Industrial
Out of all the commercial sectors, industrial is the most bullish going into 2025. Prices are starting to rise, and vendors remain optimistic they can achieve full asking price. This is primarily because tenant demand remains strong for industrial and due to e-commerce growth and the sustained demand for logistics and warehousing facilities and urban logistics and small-scale warehouses closer to consumers to support last-mile delivery.
However, you can still find opportunities in this sector – particularly when you can force through value increases – such as buying a vacant property and getting it let, and subdividing space to cater for local demand. Lenders are particularly keen on this sector at present – especially for multi-let space – and you can achieve up to 75% LTV’s, often with lower mortgage rates than in many other sectors.
4. Hotels
Before they lost power, the Tories were consulting on the introduction of several new permitted development (PD) rights in England. One of these was the potential introduction of a PD right to convert C1 (hotels) to C3 (residential). We are still very uncertain about the Starmer’s Government’s view of PD rights – in 2019 they openly said they they would abolish them if they came to power – but given PD rights in England currently provide circa 20,000 homes per annum this is difficult to see happening. If this particular PD right did come in, however, it could breathe life into many old and tired guest houses, bed and breakfasts and hotels – particularly in coastal towns.
There are also opportunities to convert hotels and other commercial uses into aparthotels – this is a rising market with a lot of demand, and high occupancy in the right locations.
5. Health
As demand drops in some locations from retailers, this is being backfilled by ‘health’ providers. This is a broad title, including practitioners of all shapes and sizes – including beauty and massage, alternative therapists, chiropractors, osteopaths and physiotherapists, as well as doctors, dentists and clinics. These can prove to be great tenant covenants and often take longer than average leases. They can also be good tenants for sub-divided office space.
6. Asset Management
Whilst trends dictate which commercial properties are ‘flavour of the month’ amongst investors, asset management is the constant that facilitates adding value to commercial properties. In markets such as the one we currently find ourselves in, it’s dangerous to rely on the market for capital value increases. Instead, it’s essential to take matters into your own hands. Enhancing property values through active management is a critical strategy that can include (amongst many other things):
- Finding motivated vendors and structuring creative deals
- Letting vacant properties.
- Re-letting properties to higher-quality tenants.
- Negotiating longer leases or lease variations
- Subdividing space to meet tenant demand
- Exploring sale-and-leaseback arrangements.
- Change of use
- Increasing EPC’s
Having multiple exits up your sleeve is essential, but always start with the commercial base case and work from there.
Top Tips for Seizing 2025 Opportunities
- Leverage Distressed Assets: Look for properties / vendors with financial or tenant-related distress.
- Embrace Data and Technology: Use platforms like Nimbus Maps / Searchland / Co Star for due diligence.
- Collaborate with Experts: Work with experienced agents, solicitors, and brokers and build great relationships with them
- Adopt Multiple Exit Strategies: Keep flexibility in mind when acquiring properties.
By focusing on the right sectors, leveraging market trends, and applying great asset management strategies, investors have the ability to achieve strong returns in 2025 while mitigating risks. As always, knowledge is the key to unlocking potential in the commercial market. For those ready to take the plunge, now is the time to carve out your niche and capitalise on the many opportunities ahead!
