Business Outlook 2025 | Capital Markets

2024 saw a notable increase in real estate capital markets activity across our specialist sectors – a trend we expect to continue in 2025.

Following a relatively subdued market environment in 2023, we saw activity steadily build throughout 2024 as investor confidence started to return. More capital has been looking to deploy with this increase in liquidity resulting in a number of sales processes being launched. Much of this has to do with a general acceptance from buyers and sellers that the current macroeconomic conditions broadly reflect the ‘new norm’, albeit with the welcome news of gradual reductions in the Bank of England base rate helping to boost confidence.

As a business, Christie & Co specialises in operational real estate which is often referred to by investors as “alternatives” when compared to the more mainstream asset classes of high street retail, offices and industrial. With the post-Covid world redefining how we work and shop, many real estate investors have been adjusting their strategies to focus more on the ‘alternatives’ and, in particular, the sectors that are underpinned by need or forward looking lifestyle choices/ consumer trends. This is a trend that we expect to continue into 2025, leading to a buyer pool which should be wider and more diverse – albeit with a sensitivity to price given the wide array of opportunities which are becoming available.

The cost and availability of capital remains a key determining factor with many existing investors looking to raise funds and some listed investors constrained by subdued share prices. This latter point includes funds located in the UK, USA and Europe where many have been actively asset managing throughout 2024 to create liquidity with a view to being in a position to start selectively buying during 2025.

Of all the sectors that we operate in, healthcare (including childcare and medical), has seen significant activity throughout 2024 as investors are attracted by the strong needs driven underpin and long-term demand fundamentals. We have seen several very substantial transactions in the UK and Europe including the sale of Northwest Healthcare REITS UK portfolio of hospitals to Assura and Civitas’s acquisition of Alloheim in Germany in September 2024. We have also seen Parkway Life REIT, one of Asia’s major listed healthcare REITs, enter the European market with a €111 million sale and leaseback deal in France of an 11 asset care home portfolio.

In a similar vein, there is a good appetite for investments in the medical sector, in particular GP and dental practices, where we have seen an increasing level of activity.

Childcare is also a sector of significant interest to a wide range of real estate investors, including increasing appetite for new build SEN school investments along with early years and larger mainstream schools. 

We expect investor interest in these ‘needs driven’ sectors to evolve further, particularly given their strong alignment with ESG and investing for a positive social impact.

For hotels, we have seen a notable uptick in activity within the UK market as illustrated by a number of recent processes involving assets let to covenants such as Premier Inn and Travelodge. Demand is coming from a broad spectrum of buyers ranging from institutional funds at the lower end of the yield curve to private equity companies, family offices, special situation funds and entrepreneurial investors for value add situations.  In Europe we have seen good demand in the key cities, especially for upscale or trophy assets together with luxury resort hotels in key European markets.

The picture for pubs and leisure has been more variable with much depending on the quality of the asset, covenant and the trading position of the operator. There has been a trend of more stock coming to the market and, in many cases, yields have been pitched at high single digit or even double-digit levels. This higher level of return provides good opportunities for a wide pool of capital albeit, often, with a need for more proactive asset management and a generally higher risk profile when compared to other sectors.

We are positive about the prospects for the year ahead and are actively expanding Christie & Co’s capital markets activity across our different sectors and operating geographies. Whilst there are clearly some macroeconomic and geopolitical factors to navigate around, the tone of market sentiment is positive. We summarise our key predictions below:

• We expect to see more capital looking to deploy in the market, with particular focus on the ‘alternative’ sectors which form Christie & Co’s core markets
• More stock and opportunities are likely to come to the market
• Subject to wider macroeconomic conditions remaining stable, yields will continue to stabilise, and we may see some compression, particularly for best in class, institutional grade stock
• The focus on sustainable investment/ESG will continue to evolve, creating a growing opportunity for social investment