Real estate investment in London is poised to exceed £14 billion in 2025, marking a significant rebound for the capital’s property market. This growth comes as investor confidence strengthens following several years of uncertainty and economic challenges. Although the expected total remains below the 10-year average of £18.1 billion, it represents a notable improvement compared to the previous years of 2023 and 2024, according to a new report by CBRE.
Richard Smart, managing director of London markets at CBRE, highlighted the renewed optimism in the market, stating, “It does feel like London’s back. It feels like it has got its swagger back.” This confidence is bolstered by several factors, including lower interest rates, government efforts to boost housebuilding, and the return-to-office mandate, which collectively are helping to improve market conditions.
Positive Shifts in Market Conditions
The real estate market in London has faced numerous challenges in recent years, including high construction costs and regulatory barriers. Housebuilding projects, in particular, were significantly hampered by the previous requirement for developers to include 35 percent affordable homes in their projects, which made many developments financially unviable. However, the recent reduction of this requirement to 20 percent has helped make new projects more feasible.
In addition to favorable changes in housing policy, the reduction in the UK’s interest rate by the Bank of England has also played a key role in improving the viability of new developments. The government’s focus on reducing red tape and cutting taxes is further supporting investor confidence and driving growth in London’s real estate market.
“This year, we’re seeing the return of a normalised market,” Smart added. “We’re back to what we used to see pre-Covid.”
Office Market Growth: A Major Driver
Investment in London’s office market has been a key contributor to this growth, particularly within the banking and finance sectors. Office take-up is a major component of real estate investment, and after a significant slowdown during the pandemic, activity has bounced back. The return-to-office mandates from many companies, especially in the financial and professional services industries, have helped reverse the remote and hybrid working trends that dominated in the wake of Covid-19.
Savills and CBRE both reported renewed confidence in larger office deals. In the first half of 2025, the volume of transactions over 50,000 sq ft was the highest since the first half of 2019, and deals over 100,000 sq ft reached their highest level since 2017. “Last year, there were virtually no transactions over £100m… this year we’re well into double digits,” Smart noted.
Prime Rent Growth and Investor Confidence
Prime rents have surged by more than 10 percent year on year, driven by strong demand for safe, high-quality assets in areas like the Square Mile. However, this year, investor interest has broadened beyond traditional prime locations to include emerging areas such as Thameside and South Bank.
In a notable deal, UAE developer Arada secured a majority stake in the Thameside West development, a mixed-use office and housing site, purchasing 80 percent of the development for £2.5 billion. Arada’s chair, Sultan bin Ahmed Al Qasimi, expressed his firm belief in London’s property market, stating, “This purchase is grounded in our unwavering faith in London.”
Life Sciences Investment Boosts Market Activity
Life sciences investments are also playing a significant role in the growth of London’s real estate market. Developments such as One North Quay have helped push volumes higher, as the capital’s life sciences ecosystem ranks third globally, fueled by strong demand for data centers and hotels. This sector’s rapid growth is contributing to a diversified and resilient property market in London.
“It feels very buoyant at the moment in the capital,” Smart concluded. “It’s nice to see.”
As London’s property market continues to recover, investors remain optimistic about its long-term prospects, with 2025 showing strong signs of a sustained rebound.
