Investment Market Update 2025
We became accustomed to a Bank of England base rate below 1% between 2009 and 2022, making property an attractive option for better returns. However, the rapid rate increase to over 5% from 2022 to 2024 led to a much quieter investment market, as buyers hesitated in uncertain times, especially when other safer and simpler investments were performing relatively well. Our experts give their views on the investment market in the South West.
At the same time, most sellers preferred to hold onto property rather than sell in a weaker market, given that yields were less attractive than in previous years. The long-awaited General Election last year, followed by a budget that did little to boost overall business confidence, also failed to immediately reignite the investment market.
However, a shift in sentiment has emerged. Many in the market now recognise that with a stable government in place for the next few years and a gradual lowering of interest rates expected, buyers are regaining confidence. Sellers, too, are returning to the market, recognising that waiting much longer may not bring significant advantages.
Through our membership in the Commercial Property Network, we have insight into investment trends across the UK. The sentiment is broadly similar everywhere—investment activity is beginning to pick up.
Investor Activity & Buyer Profiles
Lot size continues to dictate the type of buyer, but we are seeing strong interest from high-net-worth individuals and family property companies in particular.
In terms of sector performance, industrial remains the strongest occupier sector, which in turn gives investors greater confidence in acquiring industrial stock. This sector continues to perform well, with strong tenant demand, low void rates, and stable rental values.
Industrial Investment
While industrial yields are not quite at the low 6% or sub-6% levels seen before interest rate hikes, yields around 7% remain achievable.
Multi-let industrial investments are particularly attractive to some investors, as they offer a diversified income stream and greater potential for incremental rental growth. However, single-let properties with secure, long-term tenants are also appealing due to their lower management requirements.
For more information on recent transactions, yields and opportunities for investment, please contact the agency team.
Examples of typical industrial activity include:
• A multi-let investment in Goonhavern, sold last year at just under 7%, with a lot size of £1.6m.
• Two modern industrial units soon coming to market in Redruth, with an anticipated yield just under 7% and a lot size of around £1 million. These units are built to high energy efficiency standards, and it will be interesting to see how the market values their future-proofing.
Office Investment
As expected, the occupational market for offices remains less active than industrial, and this is reflected in the investment market. However, for investors who believe in the future of office space, there is excellent value to be found. For more information on the office market in the South West, please talk to one of our commercial agents.
As examples, we are marketing Poseidon House, Plymouth, a multi-let office generating an income of £172k p.a. while in Truro, we are marketing Bridge House on St Clement Street in Truro, a mixed retail and office investment with a yield of 9.25% and a lot size of £395,000. While it requires some lease renewals, it is well-maintained and offers great value at this yield level.
Retail Investment
The retail sector also presents value-for-money opportunities, particularly in market towns. Prices have likely reached a point where further declines seem unlikely. Investors are increasingly considering potential income from upper floors as a way to spread risk beyond just the retail tenant, though conversion costs can still make flat developments difficult to justify.
Recent transactions include:
A set of three smaller shops with a tenanted flat above in a good secondary part of Newquay, marketed at a yield of around 9% for a lot size of £590,000. This is now under offer and expected to complete in the coming months.
Auctions are an alternative route to market and we would be happy to talk to you about using auction to buy or sell retail investments.
Outlook & Conclusion
Looking broadly across the main sectors, industrial remains the strongest performer, while office and retail investments offer compelling value and development potential for investors who understand their markets.
We anticipate sustained demand for freehold investment properties as returns remain attractive, and investors continue to find security in tangible commercial assets.
Our commercial agents cover the South West. Please contact us here.
To discuss the investment market in the South West, please talk to our Investment team.
