Real Estate Legal Outlook 2025

Publication|

5 December 2024

As we head into 2025, we naturally reflect on 2024; a year characterised for real estate, at least in part, by its distinct lack of character.

There was no dramatic reduction in interest rates (they are creeping down slowly but are unlikely to stay there long term), no surge in insolvencies (although there were some) and no sudden opening up of the investment market (wishful thinking!). Rather than the “ready, steady, go!” sprint start predicted by many for the year just gone, we have witnessed more of a “slow and steady wins the race” approach, one of gradual progress and cautious optimism for the road ahead.

One of the predictions that is playing out is the continued shift away from interest in traditional asset classes (retail, offices etc.) towards what were previously referred to as “alternative” asset classes – these are now not so much alternative as increasingly established at front and centre stage in their own right. The real estate market is now fully alive to the importance of infrastructure for its ability to thrive, with digital and energy infrastructure currently topping the charts.

Another aspect of the real estate market recently brought into focus as an inevitable consequence of elections taking place home and away is the ability of regulation (or indeed lack thereof) to manipulate and influence the direction of travel. With immediate post election market impacts usually signalling nothing more than relief at a certain result, we will all have to wait to see the actual effects of changes in leadership across the globe. In this country there is an ambitious agenda for planning reform to “get Britain building” again – certainly, the provision of 1.5 million new homes requires an awful lot of building (and a properly functioning planning system)! And we are certainly not short of prominent real estate-related bills making their way through Parliament, particularly in the residential field with significant leasehold and renters’ rights reform on the horizon, as well as potential for a change in approach to security of tenure for business tenancies not far behind. In the US, it will be interesting to see whether Trump’s previous support for deregulation continues into his second term, and how the imposition of tariffs may impact broader economic trends and investor sentiment.

On the basis that “mood moves markets”, we remain optimistic for the months ahead, and ready for some new challenges. The Real Estate Outlook 2025 aims to provide a helpful insight into some of the activity we expect to see and potential opportunities that you may wish to explore – enjoy!

With very best wishes from the Linklaters Real Estate Team for a successful 2025.

Imogen Jones, Counsel, Real Estate

01
2025 market outlook - turning the page
02
Infrastructure critical: data centres as real estate?
03
Planning reform: land ahoy or more choppy waters ahead?
04
Making waves in a sector once safe as houses: the need for certainty in the residential leasehold market
05
Commercial ground rent financing: long-lost cousin?
06
Energy transition: winds of change

2025 market outlook - turning the page

While some unpredictability, like fluctuating inflation and interest rates, is expected, a new chapter with renewed opportunities seems to be unfolding. Interest rates and inflation may have peaked, and uncertainty is decreasing. The market, like a resilient protagonist, is recovering as we approach 2025, nearing pre-pandemic levels.

Infrastructure critical: data centres as real estate?

The digital infrastructure required to support our economies – and our lives – has now more than piqued the interest of real estate investors. Data centres (DCs) are a notable example of this. Globally, there are more than 50 real estate funds currently capital raising and actively seeking exposure to DCs, with a combined target size of over US$50 billion. 40% of this total capital is being raised specifically to invest in DCs.

Planning reform: land ahoy or more choppy waters ahead?

Planning reform has been the flagship policy of successive governments, and this continues to be the case as the new Labour Government grapples with a planning system which is generally considered to be creaking at the seams. The question is whether this Government will be able to weather the storm in which previous governments have floundered.

Making waves in a sector once safe as houses: the need for certainty in the residential leasehold market

In 2024, major changes to the residential leasehold system began with the Leasehold and Freehold Reform Act 2024 ("LAFRA") and the Renters’ Rights Bill ("RRB"). These reforms significantly impact both leaseholders and private renters, aiming to favour leaseholders as part of a longstanding plan. Download the full report to explore the implications for landlords and investors.

Commercial ground rent financing: long-lost cousin?

Commercial ground rent financing (“CGRF”) is gaining traction in the real estate market and is likely to grow. It offers a way for property owners to access capital while paying inflation-linked rent and remaining operational at the same location.

Energy transition: winds of change

The energy sector is experiencing significant changes, driven by the rapid growth of renewable energy to meet net zero goals, uncertainty about the future structure of the UK's electricity system, and concerns over grid stability amidst rising energy prices. We examine recent government initiatives and assess their potential effectiveness.