Property investors eye expansion amid economic challenges

Despite global uncertainties and economic turbulence, the UK’s property investors with larger portfolios are displaying resilience, with more than half aiming to boost their holdings this year.

That’s the message from Handelsbanken’s fourth annual Property Investor Report, based on insights from real estate investors and property management professionals.

It highlights a sector adapting to change by prioritising commercial properties over residential, sustainability and London’s resurgent appeal.

Regulatory changes, such as the Renters’ Rights Bill (RRB) and EPC reforms, elicit mixed responses: 36% view EPC changes positively, 56% see no impact and the RRB garners 36% positive views, 48% neutral and 12% negative sentiments.

Sector with growth appetite

Chris Teasdale, Handelsbanken’s chief branch officer, said: “The results of this year’s report show an industry that still has plenty of optimism and potential, even in the face of uncertainty, challenge and change.

“Whatever the wider economic backdrop, the good news is that this is still a sector with plenty of appetite for growth.”

Notably, commercial real estate has surpassed residential as the preferred asset class, with 46% expecting significant growth in demand.

Within this sector, 52% of investors are keen to increase office investments despite hybrid working trends, though 30% plan to reduce exposure, reflecting a divided yet vibrant market.

Plan to invest

However, the report reveals cautious optimism: 54% of surveyed investors plan to grow their portfolios in the next year, while 80% anticipate rising property values.

Retail properties are also gaining traction as part of diversification efforts.

London has reclaimed its status as the top investment destination, with 46% of investors favouring the capital, a sharp recovery from its fifth place ranking in 2024.

The East of England remains a strong contender at 42%, driven by high yields and economic activity in hubs like Cambridge.

Eco features are important

Sustainability is also growing in importance with 77% of tenant discussions focusing on eco-friendly features like heat pumps and solar panels.

A striking 92% of investors believe tenants will pay more for sustainable properties.

However, caution persists and while 54% plan expansion, 24% intend to offload properties, and only 14% expect significant value growth this year, down from 31% in 2024 and 39% in 2023.

Gareth Williams, the senior financial product owner, said: “The overall stability in market sentiment reflected in the report is welcome.

“However, we see our property investment customers taking a longer-term view across their portfolios, which positions them favourably to manage through these cycles.”