Confidence is returning to the UK commercial property market, with property developers identifying retirement living developments as a key driver of future growth, according to new research from Shawbrook.
Two thirds (66%) of property developers believe the commercial property market will improve over the next 12 months. Of these, 19% expect significant improvement, while 47% anticipate slight growth. This renewed optimism follows a generally positive year in 2024, with 64% of developers agreeing that the market had already improved - 11% significantly and 53% slightly.
Looking ahead, developers view retirement living projects as the most promising investment opportunity, with 42% of developers identifying the sector as the most profitable area for driving commercial property growth. This is followed by hospitality and leisure (37%), retail units in cities, towns and high streets (32%) and student accommodation (31%). Other sectors expected to contribute to growth include:
- Semi-commercial units (30%)
- Out-of-town retail units (23%)
- Warehousing (22%)
- Hospitals (19%)
Terry Woodley, MD of Development Finance at Shawbrook, said: “The data reflects a changing landscape for developers where demographic trends and economic challenges are shaping demand across different types of commercial property.
“As developers seek stable returns and long-term value, the retirement living sector stands out as a key focus area, aligning with the UK's aging population and evolving housing needs. Developers will also have a key part to play in helping the Government achieve its lofty housebuilding targets, which requires a collective, multi-pronged approach to provide adequate housing for different generations and demographics. Despite economic headwinds last year which have carried through to 2025, developers have proven themselves to be agile and resilient - with the majority being able to grow their businesses. This trend looks set to continue in the second half of this year, as many diversify their projects and build robust income streams.”
Dasos Kirksides, Head of Healthcare at Shawbrook, added: “The retirement living sector has proven remarkably resilient in recent years which have been marked by economic headwinds, numerous regulatory changes and volatility in the wider markets. As we look forward to the rest of 2025, the signs are really positive. With the economy growing and the most recent interest rate cut easing the cost of debt for operators, the sector is well set for growth. As part of the Government’s housebuilding plans, flexible and innovative solutions are needed to provide adequate retirement living options, which presents an excellent opportunity for property developers.”
