Will the built environment industry thrive or just survive in ’25?

I spent much of last week reading through the fantastic contributions to our mammoth BE News 2025 Forecast (which we had to split into five ’25 for ’25’ parts so many did we receive – thank you all). Ostensibly, this was to edit and curate the content, but in reality, it was to glean inspiration before sharing my own thoughts.

So, while crystal ball gazing is more of a fool’s errand than ever this year, said ball being murkier than a muddy ditch, here, in no particular order, are my hopes, fears and expectations for 2025:

1 This week’s surprise fall in inflation may have paved the way for faster cuts in interest rates, but the government – and the chancellor Rachel Reeves – remain under pressure on the economy after a rise in government borrowing costs and period of market turmoil. At 2.5%, inflation remains above the Bank of England’s 2% target, and the planned increase in employers’ national insurance contributions and 6.7% rise in the minimum wage from April are likely to stoke inflationary pressures. While Reeves is putting pressure on regulators to support Labour’s growth agenda, businesses – particularly those in retail, hospitality and leisure – will be putting pressure on Reeves to soften some of the Budget blows in the Spring Forecast.

2 Despite the weak economic outlook and concerns over the US economy as Donald Trump resumes power, commercial real estate investment will start to recover this year. There were early signs of recovery in the retail and office sectors last year, and with prices having corrected in these and other sectors, investors will be looking for opportunities to deploy capital across multiple sectors. But while the UK saw the highest level of retail activity in Europe last year and is seen as a safe haven for real estate capital, according to Cushman & Wakefield’s Visions report, it won’t be a free-for-all. Investors will continue to proceed with caution.

3 CBRE’s decision to take full ownership of Industrious and Yardi’s acquisition of Hubble and Deskpass have laid the foundations for a strong year for the flex workspace sector as it continues to capitalise on the post-pandemic working norms. The shortage of quality office space will continue to drive rental growth across the office market and while there are concerns that NI rises will lead to job losses and a reduced requirement for space, some of this fall will be mitigated by the ongoing return to the office as the likes of JPMorgan ask staff to return to the office five days a week.

4 It is going to be a big year for retrofit and adaptive reuse across commercial and residential real estate, especially in the office sector as landlords and developers look to retrofit or repurpose secondary offices at risk of becoming stranded assets. The good news is that occupiers are driving the demand for quality space as well. The bad is that the danger of greenwashing has been replaced by the threat of “greenhushing” as companies deliberately keep quiet about sustainability goals for fear of being labelled greenwashers. BE News will be assessing the future of the office and scope for retrofit and reuse during our 2025 Forecast Roundtable Debate on 6 February.

5 We will also be asking what is in store for the retail sector at our Spotlight on Retail event this April, when we will assess the impact of the Budget and Spring Forecast and ask if the nascent retail recovery will continue to gather momentum – or lose it again. While investment activity has picked up over the past few months, with some of the real estate industry’s biggest players placing big bets on shopping centres and retail parks, shares in Marks & Spencer and other retailers fell last week as waning consumer confidence and fears over the economic outlook overshadowed strong Christmas trading. Retailers are now bracing themselves for higher costs from April, when the changes announced in the Budget come into effect.

6 Before our Spotlight on Retail, BE News will be holding a Spotlight on Life Sciences (on 29 January, featuring keynote speeches from MedCity’s Jo Pisani and GSK’s Josh Palmer) and a Spotlight on Data Centres (26 March). Both sectors appear to be firmly on the political agenda after a string of recent funding pledges and unveiling this week of the government’s AI Opportunities Action Plan. While challenges remain, including power and infrastructure, this should be a transformational year for both sectors.

7 This could be a breakthrough year for the housing sector. The government has made housing and infrastructure key priorities, reintroducing mandatory housing targets and overhauling the planning system to help “get Britain building again”, and while 300,000 new homes a year might be over-ambitious, where there is a will, there might finally also be a way. On the downside, while house sales are set to spike in the next couple of months as people rush to beat stamp duty hikes, the future looks less than rosy beyond that as the double whammy of duty hikes and reduced thresholds hit home, particularly for first time buyers.

8 There is a certain irony in supply being stimulated just as demand is stifled, but there is little chance of the former without a functioning construction industry. If the government is to realise its housing, infrastructure and wider development ambitions, it will need to do more to support a sector still reeling from the collapse of ISG and facing an existential threat as the number of insolvencies continues to rise year on year. On 12 February, BE News will be holding the second in a series of roundtables exploring how to tackle the construction industry insolvency crisis and avoid another ISG, starting with how to disrupt a payment culture that is not fit for purpose. Ministers are beginning to acknowledge the issue and engage with the construction industry, but, as ever, actions speak louder than words.

9 Will the government also start to engage with the wider built environment industry at some point? Ministers came over all coy post-election and proved even more elusive after the Budget, but they are going to have to talk to and work with the industry if they are to ‘get Britain building again’. Now the government has unveiled many of its plans – such as the revised NPPF and AI Opportunities Action Plan – it has plenty to talk about and work with the industry on. We anticipate growing interest in public private partnerships, which is why we will be holding a Spotlight on PPPs in the next few months. In the meantime, secretary of state for housing, communities and local government Angela Rayner is winning the industry over by approving major planning applications and reversing decisions made by predecessor Michael Gove – signalling a more collaborative and less adversarial approach towards the industry from Labour than the Tories.

10 Never has there been a greater need for the industry to speak with one voice, and the intention to merge the BPF, IPF and AREF bodes well for the emergence of a more united front. From a BE News perspective, I would like to see that united front extend beyond commercial real estate to other parts of the built environment – including construction, architecture and engineering. The built environment was seen as one industry (alongside architecture) when the Commission for Architecture and the Built Environment was launched in 1999. It is high time it is seen as a single industry again, and there will be more chance of being heard by government if it is. I hope 2025 will be the year that industry bodies representing sectors across the wider industry start to come together and speak as one – and while it is impossible to predict with any accuracy what lies ahead, what I can say with certainty is that BE News will be relentlessly looking for new ways to connect and inform that wider industry in 2025. I hope even more of you join us for the ride!