U.S. Investors looking at UK Commercial Real Estate in 2025
At IDRE we can help manage international investors ownership in the UK, and as we progress through 2025, we’ll talk you through why the UK commercial real estate market presents a compelling opportunity for international investors, particularly those from the United States. With a combination of favorable economic conditions, currency advantages, and a resilient property market, now is an opportune time to explore investment in UK CRE.
Economic Recovery and Market Resilience
In the first nine months of 2024, the UK emerged as Europe’s most active commercial real estate investment market, with volumes rising 11% year-on-year to £32.7bn, surpassing the combined totals of Germany and France. This resurgence is driven by easing inflation, stabilising monetary policy, and improving financing conditions.
Notably, big box/distribution is seeing and office sector is witnessing a rebound. For the first time since the onset of the COVID-19 pandemic in 2020, the UK office vacancy rate has declined, dropping from 8.7% to 8.6% at the end of March 2025. Cities like London, Manchester, Sheffield, and Cambridge are experiencing declines in vacancy rates, indicating a renewed demand for office spaces.
Big box and industrial are likely to see a resurgence above recent times, which has seen c. 6.3m sq.ft transacted per quarter since Covid. With US politics creating the need for increased defence spending, we expect new demand from defence and aerospace occupeirs and additional manufacturing and storage space requirements from 3PL, from occupiers diversifying away from the US.
Why the UK? Well it offers a range of CRE investment opportunities, allowing for strong diversified returns.
Office Spaces: High-quality, centrally located offices with strong sustainability credentials are in demand. Investors believe such prime buildings will remain sought after despite wider market challenges.
Industrial and Logistics: The rise of e-commerce has increased demand for warehouses. Blackstone, for instance, invested £1 billion in UK warehouses in a year, highlighting the sector’s potential.
Retail Spaces: Investment in UK shopping centres reached £2.07 billion in 2024, the highest since 2016, driven by rebounding retail demand and improved leasing markets.
Currency Advantage for International Investors
The current strength of the U.S. dollar against the British pound enhances the purchasing power of American investors. This currency dynamic makes UK properties more affordable and can lead to higher returns when converting profits back to dollars. The relative strength of foreign currencies against the British pound can amplify returns on investment, making the UK an attractive destination for capital inflows.
Investor-Friendly Legal and Tax Environment
The UK provides a transparent legal system that protects property rights, with no restrictions on foreign ownership. International investors can benefit from various tax structures and debt options, including the ability to set up UK limited companies to optimise tax benefits.
Additionally, the UK has double taxation agreements with many countries, including the U.S., helping to prevent investors from being taxed twice on the same income.
Where do IDRE see value?
As investment advisors and asset managers we see value-add industrial, office and retail warehousing as providing significant medium to long-term returns. We are advising a number of clients at the moment with a view to achieving Geared IRR’s of 20-30% on 3-5 year holds, with the opportunity to exit some assets quicker should asset management timescales be accelerated.
In general, the UK’s commercial real estate market in 2025, unlike countries like the US, which are going through significant turbulence, offers a blend of stability, alongside growth potential, and favorable investment conditions for international investors. With a recovering economy, advantageous currency exchange rates, diversified investment opportunities, and a supportive legal framework, the UK stands out as a prime destination for commercial real estate investment.
For international investors seeking to invest, build a portfolio or diversify their current portfolios and capitalise on global opportunities, whilst having on the ground experts delivering the business plan in-line with expectation, IDRE and the UK commercial real estate sector warrants serious consideration.
To talk to us about potential commercial real estate investments, speak to Jonathan Brown jonathan@idrealestate.co.uk.