The commercial property market is continuing to show signs of recovery going into the second half of 2025. Growth levels remain modest but momentum is beginning to build. What is driving this upturn and what sectors should investors target?

It’s not time for bunting and streamers, but the commercial property market rebound has continued through Q2, building on the optimism witnessed early in the year. A more favourable investment environment, in particular in relation to interest rate cuts, has been integral to the trend, with growth led by improved performance in three key sectors.

What sectors are fuelling commercial market growth?

Earlier in the year there was talk of the role of the resurgence of traditional property sectors in overall market recovery – and it is office space that has emerged as a front runner, with renewed interest driving growth.

Notably, growth is centred on workplaces that cater for modern professional needs, such as hybrid working and wellbeing and fitness, as well as tech-ready infrastructure. This type of offer is set to frame sector development going forward, both in the short and longer term.

The future of remote working will also have a major influence on the performance of office space. There has been a notable push back against the trend in recent months, from larger firms at least, but at the same time, the need to provide for hybrid working remains a key focus. It will be interesting to see how far the drive for returning to the office goes.

What other traditional property sector is performing well in 2025?

The other traditional property sector credited with fuelling commercial property market recovery is retail. Notably, the talk of a comeback includes a better outlook for the beleaguered high street.

This is encouraging news, but there are some important caveats to mention, not least the inclusion of logistics hubs and warehousing in this sector, which changes the picture considerably (industrial and logistics remain the market engine room). Online shopping and e-commerce continue to be major trends, with companies investing accordingly.

Away from warehousing and logistics, retail parks are offering good opportunities for commercial property investors, in line with a growing trend for prime shopping centres and prime space in out-of-town locations.

What alternative commercial property sector is grabbing attention?

Alongside the office and retail space, the third sector playing a key role in driving the upturn in the commercial property market is an alternative one – student housing. In particular, it is the purpose-built student accommodation sector that is fuelling growth, with notable opportunities for the private sector as universities struggle with public funding and demand remains substantial.

What is key to taking commercial property investment in H2 2025?

The continued growth in optimism around the commercial property market is positive and another round of interest rate cuts will surely add to this confidence going forward. The green shoots of recovery are getting bigger.

However, growth levels remain modest and there is still some uncertainty around the market, in terms of new regulation, government reform and the economy’s vulnerability to global geo-political developments. As such, flexibility is essential for investors.

And this flexibility extends to commercial property investment financing – in terms of both traditional and alternative finance facilities. As such, the choice of commercial loan and mortgage provider will continue to be critical in H2 2025.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.