Q4 saw £406 million traded, up 6% on Q4 2023. Whilst volumes in Q4 are 4% below the five year average, there are a number of deals due to complete in early Q1 2025, including a couple of significant transactions, which should provide a bounce to start 2025 positively.

The largest transaction of the quarter was in Aberdeen, with EEH Ventures concluded a £45m acquisition (17.88% NIY) of a trio of office buildings at the Prime Four Business Park from BMO. In Glasgow, Swiss Life acquired the city centre Maldron Hotel for £31.5m (5.50% NIY) from abrdn. Also in the west, Iroko Zen acquired Barrhead Retail Park for £14.6m (7.00% NIY) from London and Scottish and at Eurocentral, 30 Coddington Crescent was acquired by AFH for £9.4m (5.80% NIY) from Ahli United Bank.

Lismore’s quarterly investor research shows a good degree of optimism. 88% of respondents see 2025 as a year of opportunity, with fund managers and investment managers particularly positive. Challenges include economic contraction and budget-driven pressures on retailers and recruitment. However, stabilised pricing and strong rental growth in prime industrial, high street retail and selective offices fuel cautious optimism, with potential yield compression anticipated later in 2025, dependent on interest rate trends.

Investors predict that the top performing sectors for 2025 will be industrial, living and retail warehousing, with 77% of respondents identifying these resilient and liquid sectors as top performers. Prime office assets and high street retail in key locations also show promise, driven by rebased rents and rental growth. Meanwhile, alternatives and hotels received less interest, though niches like data centres and life sciences highlight emerging opportunities tied to technology and healthcare.

Confidence has emerged as the most significant factor influencing the market, rising to 30% from 21% in Q4 2023, reflecting growing optimism. Improving macroeconomic conditions (21%) and stabilising debt terms (27%) also play vital roles, signalling optimism for 2025.

Lismore director Simon Cusiter also shared his predictions for 2025. He said: “Following a challenging period, the market shows clear signs of recovery, with investment volumes rising, interest rates easing and confidence returning. As our research has shown, investor appetite for real estate remains robust but highly selective.

“We expect 2025 to mark a more stable recovery phase, with investors focusing on sectors and locations primed for income growth. However, with interest rates expected to reduce slowly and inflation likely to remain slightly elevated, significant yield compression seems unlikely. Early 2025 is anticipated to see investors prioritising income potential over yield shifts, with momentum building as the year progresses.

“Scotland’s logistics and multi-let industrial market stand out, with rents remaining competitive compared to the UK and strong growth potential along the M8/M74 corridors and urban estates. Edinburgh’s central business district (CBD) office market is also promising, with demand exceeding supply for core city-centre spaces.

“The build-to-rent (BTR) residential sector presents untapped opportunities. Recent Glasgow transactions hint at returning BTR liquidity. Additionally, long-let, inflation-linked assets – especially in hotels and leisure – are drawing investor interest, due to attractive pricing relative to vacant possession values.”

Tom Elviss, fund manager at Columbia Threadneedle, said: “2025 presents a mix of challenges and opportunities for real estate investors. Sectors like industrial, retail warehousing, and residential are poised for growth, driven by demographic shifts, digitalisation, and supply chain demands.

“Global capital is expected to play a key role, especially as sustainability credentials and rental growth enhance appeal. However, headwinds such as economic uncertainty and rising operational costs persist. Investors’ focus will be on sectors with resilient fundamentals and adaptable operational models.

“Liquidity will hinge on global players deploying capital and motivated vendors entering the market.”

While H1 2025 may continue the trends of late 2024, Lismore anticipates improved sentiment and greater market activity in H2, setting the stage for a promising year ahead.