UKREiiF 2025 review: Industry holds out for fewer bumps in the road as macroeconomics dominate

CoStar News was out in force this week at UKREiiF, the three-day event launched four years ago that has increasingly become the must-attend real estate conference in the country.

As delegates' suitcases rattle over the cobbles of the streets around the northern city of Leeds' Royal Armouries museum and they make their way home after three days of conference, there is a hankering for fewer bumps in the road during the rest of the year.

The disruption caused by worse-than-expected inflation figures in the week and their impact on interest rates decisions, as well as tariffs and global conflict, dominated debate at UKREiiF 2025, which was attended by 16,000 property professionals.

CoStar News rounds up the best of the sessions at the annual property and built environment conference, as well as talking to industry experts about the performance of key sectors and the health of the UK commercial real estate.

The event was packed, with the registration queue almost stretching back out over the bridge into Sovereign Street in the city from the Armouries at one stage. The blazing sunshine added to a general sense that UK real estate was putting its best foot forward, no matter what else was going on elsewhere in the world.

Basil Demeroutis, managing partner at investor and developer Fore Partnership, certainly thought so. "With 16,000 people here that certainly speaks to the power of the UK market. In some ways it is the one country carrying on surrounded by a state of chaos," he joked.

Architectural consultant Ben Cross said it was helpful that leading UK government figures such as deputy prime minister Angela Rayner and minister of state for housing and planning Matthew Pennycook were there, enabling the industry to discuss critical matters. "From my point of view if the government wants to be a superpower in clean energy then it should not be so focused on new housing, but on the standing stock."

Colin Thomasson, head of UK investment properties at CBRE, was in equally upbeat mood. "So many participants in the market are here. My sense is that in the last couple of weeks the level of cautious optimism has improved. There is definitely more capital and more clients getting support to do things from Boards and Investment Committees. After Liberation Day at Mipim it was a big subdued and the weather was grey. The sun is out here and that is a good barometer, I think, for the resilience of the industry and country."

After an enthusiastic opening welcome from mayor of West Yorkshire Tracy Brabin, it was an American investment specialist, Tom Wagner, who was first in line to pitch a major, regional regeneration project, the Birmingham Sports Quarter.

Knighthead Capital Management, Wagner's US-based asset management firm, completed its takeover of Birmingham City Football Club in July 2023, and wants to develop a £3 billion mixed-use neighbourhood in the area, centred around a new 60,000-seater stadium.

Wagner, who said the club had already acquired circa 60 acres for the scheme that will have homes, hotels and retail, labelled the UK a great place to invest, praising the government's work on planning reform to remove obstacles to growth.

But he warned that the delivery of the Sports Quarter, which he described as a "community asset" capable of creating £10 billion gross value added by 2050, would need support from local, regional and national government.

"We all know that the success of our enterprises depends on the partnership between private and public sector operating in partnership.

"At Knighthead, that partnership means working hand-in-glove with the mayor of the West Midlands, Richard Parker, and Birmingham City Council, and in Westminster with the deputy prime minister and her colleagues.

"If the government is serious in its stated desire to leverage overseas finance to create growth and, above all, if it's serious about improving the lives and livelihoods of people who deserve it most, we collectively must get behind this project and work to ensure that it comes to fruition."

Wagner's speech set the stage perfectly for deputy prime minister Angela Rayner, who addressed delegates on Tuesday morning. She insisted the government would match that level of ambition by working to "get Britain building again" to deliver new infrastructure and homes.

She focused on the last point during her speech, arguing that the government had already put in place a number of measures to remove the blockers, including opening brownfield and "greybelt" land for development and introducing the Planning and Infrastructure Bill.

She encouraged the real estate sector to take advantage of the opportunities the government's work on planning would create, adding that she and the prime minister would continue their work to bring "stability and confidence to invest in the future".

Rayner said: "I urge everyone across the whole system to seize [opportunities] with both hands. To investors, I say: there are an exciting array of opportunities... To our housebuilders, we have listened and we’re reversing the tide to create the right conditions.

"But we need you to build, build, build. To our mayors, I say don’t hold back. Take control of planning to drive the growth across housing, transport and skills."

Calls for investors and developers to "build, build, build" came as Rayner suggested the government understood the enormity of its target to deliver 1.5 million new homes by the end of this Parliament, saying it was "stretching".

"I say that I don’t shy away from the scale of the crisis facing us. Because it is monumental," she added.

Mixed-use developer Socius was one of the many real estate companies attending UKREiiF this year. Barry Jessup, its managing director, told CoStar News that the government's rhetoric around reform was strong, but the industry was waiting to see concrete action.

He explained this would be a "key trigger" for development, but pointed out some investors were already making moves, with one of its partners starting works at Mill Yard in central Cambridge and another lodging a planning application in Sutton for the London Cancer Hub.

"In terms of the sentiment more generally in the conference, it's definitely mixed – there are no two ways about that. I think that would be my overriding sentiment at the moment. There are a lot of people waiting.

"We've had a series of shocks, one after another, which is why I think the likes of Railpen and Aviva are pushing forward, but there are a lot of people waiting on the sideline. The train hasn't started running at full steam yet."

Jessup listed overregulation and interest rates as two factors affecting development, explaining the compound effect was debilitating. He suggested a simplification of policy could help to kick-start building projects.

"They are all well in their own way, but if you then keep layering on, eventually you cook the golden goose, and that's kind of where we are at the moment."

Jessup also said that he wanted to see a greater focus from the government on employment space as it attempts to stimulate economic growth. "What I'd love to see government do, and it's relatively easy for them to do, is for the National Wealth Fund to pivot into growth mode," he said.

"I think it's done a lot of great work in the last six months around sustainability investments and housing, but I think they could focus on employment more [to] unlock employment opportunities that will have a much greater impact on growth than residential efforts."

One region looking to secure investment to develop more employment space, including offices, across its cities is the East Midlands.

Claire Ward, its Mayor, told CoStar News that she wanted to increase office development as her regional team outlined plans for circa 45.2 million square feet of commercial space and 52,000 homes.

Working with her is Areli Developments, founded by Rob Tincknell, who worked on the redevelopment of London's Battersea Power Station. Areli is implementing a spatial vision strategy that it says will make it simpler for developers and investors to start major projects in the region.

Tincknell explained how the East Midlands work compared with London: "The Nine Elms Opportunity Planning Framework was so carefully structured, it gave investors total clarity over what they could do: they could build this high, this wide, on this plot... they had to pay this much levy etc... and that opened the floodgates to investment.

"That is what we are endeavouring to do here. We are at the early stages of that but what the mayor and the rest of the team here has cleverly done is taken the 14 projects that are on the table today and pulled them together into one project."

Ward added: "By starting with who we are, what we are and what are the opportunities, it will bring talent and from beyond our borders to come and look at it and say, 'we could relocate or locate this here, or we could develop X here'.

"That's what we are open to. We don't think we have all the answers, but we think that there are lots of people out there with exciting plans of their own, they just don't quite know where to put them."

Heading into the conference, some sizeable industrial lettings completed, with GXO signing for 885,000 square feet at Panattoni's Avonmouth scheme in Bristol.

Segro's head of national markets, Dan Holford, still sees the industrial market was challenging at the moment, largely due to macroeconomic events such as Trump's tariffs and turbulence in the Middle East.

Holford said Segro remained in a good position, having been highly active last year, with the firm delivering warehouses for key tenants, including Greggs, across its major sites.

"What we generally are finding at the moment is that customer conversation is taking longer than they would have done this time 18 months ago or 24 months ago. That is largely due to that sentiment. Those people are a little bit nervous about what is going on globally, so that is affecting timing and decision-making and approval processes.

"We are still hugely, hugely positive about the market, we are still massive fans of undersupply coming through in the market. We are still seeing growth in ecommerce and online retail, so we are still confident about the future."

In the week before UKREiiF, JD.com took circa 550,000 square feet across two sheds at a PLP scheme in Milton Keynes. Holford said Segro is alive to Chinese companies entering the UK market on a different scale and suggested geopolitics may be at the heart of their increased activity in the country.

"Is that a result of the American position, do [Chinese firms] see the UK as a bit of a safe harbour ? Quite possibly. We're really alive to it and having conversations with some of the Chinese ecommerce [businesses] and retailers about our opportunities."

Earlier in the week the UK government agreed a trade deal with the EU in what was a significant step to re-engage with its neighbours after Brexit. Holford said Segro wanted to see more stability in the second half of the year to give the industry confidence to do deals.

"We all want a bit more certainty and a settled market. It feels like the direction of travel at the moment is that we are starting to get there. I think we are on that precipice of things getting more positive. I don't think we are going to turn back to [the highs of] 2022 straight away, but I think generally we will see a more positive mood."

One subsector of the UK and global market which continues to gather attention and momentum is data centres, with Holford's colleague and head of Western corridor, Anna Bond, hosting a session on their potential to drive economic growth.

During the panel discussion, Google strategic negotiator Daphne Adjei said many traditional industrial investors were looking to diversify into data centres, with her co-panellist James Tyler, UK managing director of Equinix, calling them the "backbone of the modern industrial economy".

But she warned that investors had to seriously consider the nuances of data centre delivery if they were to take the plunge, with the needs of end users different to those of others in traditional Use Class B8 structures, such as warehouses and open storage.

"The reason I say this is because, if your business model is [about] promoting land for planning, say, have you considered things that you wouldn't necessarily consider for traditional B8 that you would need to for data centres.

"Some of these things include your end user's standard specification, so if their standard spec is that they build heights to 25 metres, but you are promoting land at outline planning for 15 metres, already you're at a loss."

Adjei added that valuers were up against it to give accurate estimations of plots that could host data centres, particularly those on AI Growth Zones, introduced by the government in January to accelerate data centre delivery for the AI industry.

"I think we need to make sure that there is still substance and evidence and justification to valuations, and it's not just a case of market value times ten, owing to the fact that land falls within an AI Growth Zone.

"What you don't want to happen is that investors are almost put off by these overinflated land values and it's actually preventing growth within the industry."

On Wednesday, Hammerson finalised its deal to buy Brent Cross shopping centre in London for a net cash consideration of £186 million.

Dominic Bouvet, Cushman & Wakefield's head of UK retail and leisure, told CoStar News that deals like this demonstrated the strength of UK retail, arguing that the fundamentals for investment were strong, including healthy take-up stats and rental growth at top schemes.

He said consumer confidence would be crucial to retail's performance during the rest of the year, with YouGov's index revealing the largest month-on-month drop in its measure since April 2020 this week, a slight knock for the industry.

Retailers will have to deal with bumps in the road, such as inflation, which Office for National Statistics data shows rose to 3.5% in April. Bouvet said he remained optimistic about retail this year.

Bouvet said: "In Q1 and the start of this quarter, we have seen a continuation of a very strong occupational market but there is a question of whether we are going to see consumer confidence impacted, given the way the market is with inflation remaining high. Really what's going to help our market is if interest rates continue to drop."

He flagged the secondary retail property investment market as a big opportunity in 2025, adding this was an area where liquidity was strong.

"It looks very affordable and, if you are buying something in the teens – yield-wise – then that seems to be good value. If you can get a bit of an uptick on your net operating income before your exit, you'll see a yield shift – it's very simple.

"It's just whether those secondary assets will struggle with the consumer confidence and spending. Will they struggle more? The answer is probably yes."

Another sector to have felt the effects of global political events over the last six to 12 months is offices. But Savills' James Evans, head of national office agency, and Clare Bailey, commercial research team director, said appetite for the best regional workspace has remained constant.

Evans said the top five assets in any regional market, whether Bristol, Edinburgh or Leeds, would experience leasing velocity and healthy rental performance during the remainder of the year.

He added that a limited pipeline of new-build offices coming through along with the increasing quality of schemes, now catching up with London, were contributing to rising prime rents.

Bailey said professional services had been one of the industries driving the regional market, while education providers have also been active. She added that office developments focused on placemaking have been the recent winners, while location remains fundamental with more people returning to cities after Covid.

Evans said the tale of the regional office markets is a lack of prime accommodation arguing that, even though developers may want to build, they are still finding it difficult to access lending.

"There still remains a lack of confidence in the office sector and yields have moved out accordingly. They are starting to track back in, so at some point, I would suggest this year, that a combination of some yield compression, continued rental growth and boldness [will result in new development]."

He also insisted that there was a big opportunity in the regions for investors to take advantage of traditional office landlords, particularly UK institutions, which are continuing to divest offices that require large capital expenditure projects.

"There are assets in the regional market that if I were a gazillionaire, I would buy them because they are never going to be cheaper," Evans said. "There is private wealth out there, family offices etc, and overseas private wealth that actually see real value in the sector."

Rob Madden, executive director and head of UK leasing at CBRE, said the supply side is increasingly thin for offices. "The truth is people want to move to better and better buildings. There will though be more regears and that is an increasing trend, partly because of the physical cost of moving. There will also be more take-up in non-core locations."

James Finnis, head of UK agency at JLL, said the occupier market across prime offices and big-box logistics is strong. "The question is one of stock and the ability of the investors to develop to replace this. The big box stats are very strong."

Leeds-based Eamon Fox, head of offices and development in Yorkshire for Knight Frank, said Leeds' office market is performing the best in the 20 years he has been working in the city.

Pointing to healthy take-up figures in the first quarter of the year, at around 250,000 square feet, he said a number of companies, including FTSE-100 firms, were looking at offices for around 300 people of 400 people, becoming comfortable with that size of operation.

"The 'why Leeds' proposition has never been stronger. It's what I see, it's what I feel," he added. "We're going into a market where it is getting a bit more tricky, a bit more difficult, and it's time to put your head down and get deals done."

Harriet Caddick, a director at Savills in the investment strategy and asset management team, focused on cross sector portfolios, said the mood overall continues to vary "sector by sector.

"It is still very sensitive in all sectors, but in the living sector there is a great opportunity. The exam question for my team is ultimately how do we optimise the portfolio?"