Over Half of UK Property Investors Plan to Expand Portfolios in 2025
- Portfolio Growth: 54% of investors intend to increase the size of their portfolios, with 73% aiming to diversify geographically and 75% sectorally, reflecting a strategic approach to growth.
- London Leads Again: Cited by 46% of respondents, London has regained its crown as the most attractive region, followed by the East of England at 42%.
- Commercial Property Surges: 46% of respondents expect significant demand growth for commercial assets, compared to just 17% for residential, marking a historic shift in investor preference.
Despite a turbulent backdrop of geopolitical shocks and economic uncertainty, UK larger portfolio property investors are maintaining a long-term perspective, with over half planning to grow their portfolios in 2025.
Handelsbanken’s fourth annual Property Investor Report reveals a sector adapting to change, pivoting towards commercial assets, embracing sustainability, and showing renewed confidence in London as the top investment destination.
The report, informed by a survey of larger portfolio real estate investors and property management professionals, underscores a resilient market. Key data points highlight a cautious but persistent optimism: 54% of respondents plan to expand their portfolios over the next 12 months, and 80% expect their portfolio values to rise. For the first time, commercial property has overtaken residential as the most attractive asset class, while London reclaims its position as the most desirable region.
A Sector Adapting to Change
The report paints a picture of cautious optimism. While 54% plan to expand, 24% intend to reduce or dispose of properties, and sentiment has shifted slightly from previous years, only 14% expect significant value growth in 2025, down from 31% in 2024 and 39% in 2023. This reflects a market balancing opportunity with prudence amid global and domestic challenges.
Chris Teasdale, Chief Branch Officer at Handelsbanken, said: “The results of this year’s report show an industry that still has plenty of optimism and potential, even in the face of uncertainty, challenge, and change. Whatever the wider economic backdrop, the good news is that this is still a sector with plenty of appetite for growth.”
London Back On Top
London’s return to the top spot (46%) marks a significant shift from 2024, when it fell to fifth place, trailing regions like the East of England and the North West. Nonetheless, this year, the East of England remains a strong contender at 42%, buoyed by high yields and economic growth in areas like Cambridge. This regional variation underscores the need for localised expertise, a point emphasised throughout the report.
Commercial Assets Take Centre Stage
For the first time, commercial property outshines residential, driven by strong demand expectations (46% anticipate significant growth). Within this sector, 52% of investors plan to increase exposure to offices, despite hybrid working trends, while 30% aim to scale back, indicating a polarised yet dynamic market. Retail also garners interest, aligning with diversification strategies.
James Sproule, UK Chief Economist at Handelsbanken, commented: “Despite numerous internal and external shocks, the UK property sector has demonstrated remarkable resilience over the past few years. Property continues to offer robust investment opportunities and relatively attractive, long-term returns.”
Sustainability: A Competitive Advantage
Sustainability is a growing priority, with 77% of tenant conversations including demands for features like heat pumps and solar generation. An overwhelming 92% of investors believe tenants will pay a premium for greener properties, a trend supported by positive or neutral views on EPC reforms (36% feel more positive, 56% report no impact).
Chief Branch Officer Chris Teasdale added: “I was encouraged to see investors believe that tenants recognise the value of a property that benefits from being more sustainable and are willing to pay a higher rent as a result.”
Navigating Legislative Winds
The report also examines legislative impacts, such as the Renters’ Rights Bill and EPC reforms. While 36% view EPC changes positively and 56% see no effect, the Renters’ Rights Bill elicits a mixed response, 36% feel more positive, 48% neutral, and 12% more negative. Investors appear to be adapting to regulatory shifts, particularly those enhancing sustainability.
Looking Ahead
The UK real estate sector remains a dynamic arena, with investors leveraging diversification and sustainability to navigate uncertainty. Gareth Williams, Senior Financial Product Owner, Corporate Lending at Handelsbanken, concluded:
“The overall stability in market sentiment reflected in the report is welcome. However, we see our property investment customers taking a longer-term view across their portfolios, which positions them favourably to manage through these cycles.”
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