Break point, or all to play for? Predictions for H2 2025

2025 opened with global turbulence and economic volatility—plenty of mishits and unforced errors. But now, halfway through, all is not lost. Here’s what we’re watching for the second half.

What do you think? We’d love to know!

• 2025 will turn out to be a defining year for corporate real estate: activity is building in global markets, with deal flow accelerating, available quality supply shrinking, and the recognition that delay only increases costs or compromises is leading to decisive action.  Expect an increasingly busy second half.

• European investment to end the year up 10% on 2024 volumes.  Improving sentiment in global cross-border investment has run up against geopolitical uncertainty and financial market volatility. That said, there are early signs of renewed appetite for core strategies, including from sovereign wealth funds. We forecast total global investment will be broadly in line with last year, but Europe will be a notable bright spot.

• UK investment: £60bn in view.  Despite a slower start to the year, we expect activity to pick-up in H2. Growing momentum is already visible in the domestic lending market, where activity reached a five-year high in May, and we predict the UK will remain the top global destination for cross-border capital.

• Bad meaning good: why interest rates will continue to fall.  There was already a clear consensus that August will see a rate cut, but lacklustre economic data in recent weeks have fuelled speculation of further and deeper cuts into 2026.  As Tom Bill's recent podcast found, some now believe that multiple cuts are possible before the end of the year. 

• £200/sq ft rents? Don’t bet against it.   At least not in London’s supply-constrained West End office market.  In fact, rents are set to reach new highs in several office markets across the country, as a lack of construction in recent years comes home to roost.  Look out for our data updates next week from Shabab Qadar.

• Online retail penetration will flatline this year. We estimate that annualised online penetration will be between 27% and 27.5% for 2025. Online has found its natural place in the retail ecosystem, and like many great revolutionaries, the advent of ones 30s coincides with slightly less disruptive tendencies.

• Chinese retailers to drive warehouse demand.  The government is considering changing legislation that currently allows the import low value goods to avoid tariffs. If enacted, this would necessitate holding stock and fulfilling orders within the UK, rather than in China, driving demand for warehousing and the use of 3PLs within the UK. Some Chinese retailers and logistics providers appear to be moving pre-emptively and we expect more of this activity to come.

• Defence R&D to drive tangible demand for innovation space.  Venture-backed startups and tech firms will expand further into dual-use technologies, and traditional contractors will pivot towards R&D, reinforced by the UK’s £400 million Defence Innovation Fund. Read more in our recent update on the government's industrial strategy here.

Paranoid of androids?

Recent survey data from the Office of National Statistics surprised me: can it really be that so many businesses really don’t use any form of AI yet? Apparently so.

This is a great reminder of how easy it is to get lost in echo-chambers, and – perhaps – that we are still at the very early stages of the AI journey.  My prediction: these numbers will look very different in 12 months’ time. 

Nick Wadge , our Chief Technology Officer, recently shared what he thinks will drive successful AI adoption in real estate – take a look in our latest Technology report, authored by Lily Nguyen.     

In search of lost (free) time: or, how firms are reacting to acute labour shortages

Predictions are not easy, and even the most famous economists don’t always hit the mark: almost 100 years ago, John Maynard Keynes worried about what we’d do with all our free time and speculated that a 15-hour working week might be the norm. 

For all the hype, even AI hasn’t (yet..?) made that a reality for most people.  In fact, for certain roles, labour shortages are increasingly acute. Global unemployment is at a 35 year low.  Hiring is challenging and expensive, creating a strong incentive for firms to ‘grow their own talent’, according to Lee Elliott.

Lee's latest research shows how different firms are running different approaches, but that the salient point in relation to real estate is all of them need appropriate spaces.  Take a look at Lee’s paper for more detail in what different companies are doing. 

London’s niche financial sector: Flight Risk or False Alarm?

The government’s first budget introduced several tax measures affecting the niche financial sector, either directly or indirectly. Key changes include reforms to nondomiciled tax status and changes to carried interest taxation and capital gains tax. Concerns were raised that such moves could trigger an exodus of niche financial firms.  But how likely is that to play out, in reality? 

jennifer townsend explores the issues in our latest research on the topic, here. 

And for those short on time, Jennifer and Chris Dunn have a great video summarising the key points. 

 Keeping it real: why understanding inflation is more important than ever

For some reason, the 1990s was all about keeping it real – ironic, given that inflation was finally under control, and the need to differentiate between nominal (i.e. quoted) prices and real (inflation-adjusted) prices was becoming all but irrelevant.

Today, UK CPI inflation for May shows prices are up 28% since December 2019.  This means prices have risen roughly twice as fast in the 2020s as they did in the 2010s. 

The need to think in real, inflation-adjusted terms is back, and that is increasingly reflected in questions we are getting from clients.

Is a record rent actually a scary or exciting new high in inflation-adjusted terms?  Does our prediction of an annual investment total of £60bn mark the return of normality?  The answers are not clear until we strip out the effects of inflation. 

Removing the impact of inflation on a spreadsheet is trivially easy.  The challenge is that most of us are not mentally prepared to do so in ‘real-time’.  Especially, perhaps, those of us who have lived and worked through the previous two or three decades of comparatively benign price growth.

We must fight to remind ourselves that even recent comparisons – such pre-covid vs. today, for example – will often be wildly misleading unless that 28% rise in prices is factored in.

Inflation itself is also an opaque measure for various reasons, especially when it comes to the wider ‘built environment’.

 What to look out for in the week ahead

• Real estate data: As we turn the page on a new quarter, we’ll be finalising and releasing own data. First out of the blocks will be our London office market coverage.

• Economic data: It’s a busy week ahead, with construction, industrial production, services and GDP initial estimates all due.  

• Tariffs: back on the agenda.  President Trump's 90-day tariff pause is set to expire on 9 July. During this period, country-specific tariffs were suspended (excluding China), while a flat 10% tariff stayed in place for most imports.

As ever, please do feel free to share your thoughts, comments, and questions. I'd love to hear them!