UK commercial real estate investment volumes are forecast to reach between £45bn and £50bn next year, exceeding 2024 levels, according to the Colliers 2025 predictions report.

Colliers predicts investor sentiment will improve and capital market activity strengthen in the second half of 2025 as interest rates stabilise. Yield compression is also forecast as gilt yields stabilise, supporting stronger returns.

Commercial property returns are expected to reach double digits (11%). This will be supported by a “profound shift” from investors in the way they approach investment in the sector, according to Colliers, with investors moving beyond traditional prime assets to focus on value-added opportunities, sustainability, and flexible space.

Meanwhile, refinancing demand is set to increase in 2025 as borrowers seek to restructure debt in response to falling rates, the report says.

However, lending will remain selective, with lenders prioritising prime assets and properties that are currently ESG-compliant or have a plan to achieving high sustainability targets, Colliers said.

Colliers’ report also highlights that changes to business rates in the recent Budget will have a significantly impact on larger properties with rateable values over £500,000.

Retailers operating flagship stores and large high-street units are expected to face higher operating costs, adding further pressure on profitability. Calls for reform of the business rates system are expected to continue in 2025.

John Webber, head of business rates at Colliers, said: “The increase in the business rates multiplier will place significant cost pressures on retailers, especially those with larger, high-profile stores. Many retailers are now reassessing their store portfolios to balance operational costs with growth ambitions.”

Walter Boettcher, head of research and economics at Colliers, added: “Colliers 2025 Predictions report highlights a year where resilience and innovation will define success in the UK commercial property market.

“The challenges of recent years have laid the groundwork for a reimagined industry – one where creative investment strategies, bold occupier decisions, and the ability to adapt to evolving demands will set the pace. Collaboration across sectors will be essential to unlocking value and creating sustainable growth for the future.”