Q3 momentum points to improved sentiment across the real estate sector

Although this month’s 25 basis point (bps) rate cut to 4.0% by the Bank of England (BOE) came as little surprise our economics team was surprised at the voting in the Monetary Policy Committee. Market observers were expecting a three-way split among its nine members with predictions that five would favour a 25bps cut, two a 50bps fall and two would vote for no change. However, for the first time in its 28-year history, two rounds of voting were required to reach a majority decision, which sent a hawkish message to the markets that underlined the BoE’s steadfast commitment to curb inflation and reduce it to the Bank’s 2% target.

The fallout from the decision is that while rates had been expected to end 2025 at 3.75%, the market is now somewhat less confident on what path the decision makers at Threadneedle Street will take while inflation remains elevated. That said, our economics team is forecasting that interest rates will continue to move lower and reach 3% in 2026.

Attention therefore is now firmly focusing on the Autumn Budget and whether Chancellor Rachel Reeves will announce tighter fiscal policies or maintain her commitment to “non-negotiable” fiscal rules. Her stance is causing some uncertainty which some commercial real estate players think will keep a lid on any dramatic improvement in consumer confidence.¹

Despite this lack of clarity, the real estate debt market was buoyant last quarter. Activity increased as clearing banks aggressively tried to build market share, which resulted in tighter margins.

However, the appetite for investment remains. Real estate services firm Savills points out that there are “many signals suggesting now is a good time to invest”.²

At a sector level, this year is expected to be a key year for several areas. The living sector will benefit from the Government’s commitment to tackling housing shortages, with investment levels expected to increase in build-to-rent, student accommodation and affordable housing.³ While simultaneously the government’s 10-year infrastructure plan as well as increased funding for advanced manufacturing is set to boost demand for industrial and office space.

Since the enactment of the Building Safety Act we have seen a major hand brake applied to new starts for Residential buildings over 18 metres as the authorities have struggled to meet mandatory timelines for approvals. We are now hearing from our clients this is beginning to improve.

Against this backdrop, our real estate team successfully deployed capital across all our key sectors in the last quarter: purpose-built student accommodation, build to rent, build to sell, grade A office, industrials and logistics sectors.

Our syndications team is reaching a significant milestone of closing £1 billion in syndications since we launched our syndication desk in 2023. This strategy has enabled the lending team to successfully fulfil our clients’ needs and invest in larger property deals.

During the last quarter, REALIS, our real estate equity strategy, successfully closed two additional deals. To date, REALIS has deployed capital across 5 deals targeting a gross value of c.£130 million in prime out-of-town office and logistics developments.

These milestones are testament to the deep understanding of the real estate sector across dedicated team, which we have built over the last 30 years. Our long-standing relationships with many of our clients and our ability to execute innovative and bespoke structures, has allowed us to continue to partner successfully with our client base.

¹ Colliers | UK Property Snapshot | July 2025 Insights
² Savills UK | Market in Minutes: UK Commercial – July 2025
³ UK Real Estate Market Outlook Mid-Year Review 2025 | CBRE UK