The most closely followed indicator in the market continues to be the Bank of England base rate. Whilst last week’s 25 basis point cut was well received, the weak growth outlook continues to be a concern, and, led by the threat of a tariffs inspired global trade war, there is the potential for inflation to creep up. At Investec, we anticipate three further cuts totalling 75 basis points, taking the base rate to 3.75% by the end of 2025, which will help unlock further liquidity in the market.
Looking past this uncertainty however, there are several encouraging indicators underpinning our belief that the year ahead will be another positive one for our team.
Last month’s PwC’s CEO survey saw the UK ranked as the second most attractive country to invest in by global CEOs1, behind only the US. At the same time, CBRE reported that commercial property recorded a total return of 1.1% in December, the highest monthly total return for 20242.
With backing from the wider Investec Bank, 2025 will see us further evolve our offering, as we look to deliver on our even more ambitious lending targets. This will be driven by an appetite, and the capability, to write larger ticket loans, leveraging our now well-established syndication and distribution platform, and increase in development financing. Building out our REALIS equity investment product is also a priority, and we have had an encouraging start to the year, closing our second, third and fourth transactions.
Our high conviction sectors remain unchanged. The Living sector, in its various guises, continues to be underpinned by compelling, long-term structural and societal fundamentals, namely an acute supply/demand imbalance that necessitates the delivery of more high-quality accommodation.
Whilst industrial and logistics rents have outperformed other sectors in recent years, we are seeing plenty of opportunity to support sponsors looking to capture this growth via asset management, including ESG-led investments, in order to maximise and deliver on a property’s reversionary potential. Occupiers are ever more discerning and are willing to pay for the best space in the best locations.
Office rhetoric is increasingly focused on creating sustainable, best in class space that businesses of all shapes and sizes require, whether it is delivered through ground-up development or asset repositioning. With the return to the office movement gathering pace, we will continue to support clients looking to deliver new or repurposed office space.
Other themes including elevated construction costs, distress, transitional finance requirements and occupier affordability concerns, will also influence what remains a highly disciplined underwriting process. Above all, however, we will continue to be defined by our commitment to relationship banking – and are proud to have provided funding to many repeat borrowers, which remains our key differentiator.
1 Source: PWC’s 28th Annual CEO Survey, 20 January 2025
2 Source: CBRE, Strong Results for UK Real Estate at End of 2024, as All Sectors See Capital Values Rise in December, 9 January 2025