Capstone UK Market Update

As of February 2025, the UK’s property, construction, and real estate sectors are navigating a complex yet promising landscape. Despite economic challenges and evolving fiscal policies, signs of cautious optimism are emerging, suggesting that growth opportunities may be on the horizon for those ready and able to adapt.

Economic Overview

The UK economy is showing resilience, as seen by the reported 0.4% monthly growth in construction output, with increases in new work and repair/maintenance. This shows a balanced market, not reliant on single project types.

Domestic employers face higher operational costs as a result of the recent fiscal policies introduced by the Labour government. UK-focused businesses have underperformed compared to their international counterparts, but opportunities are still emerging.

A key factor that could create more opportunities is the potential for further expected interest rate cuts. With inflation slowing and the labour market showing signs of slackening, some analysts believe that lower borrowing costs could provide a much-needed boost to property and construction activity. The overall GDP forecast of 1.2% for 2025 is an ever-present influence of investor confidence and spending patterns.

Interest Rate Dynamics

The Bank of England has reduced the base rate three times since August 2024, bringing it down to 4.5%. While the focus is on preventing recession by lowering borrowing costs and unlocking capital, these shifts are already having an impact on construction and development projects.

With cheaper borrowing and buoyed lender confidence, some developers are finding project feasibility assessments more favourable, and there’s greater optimism that a larger number of commercial and residential developments could move forward due to financing becoming more accessible. Whether it's large-scale infrastructure projects, new housing developments, or mixed-use complexes, lower interest rates could unlock opportunities that were previously on hold, allowing more projects to come to market and driving a renewed sense of confidence across the sector.

Commercial Real Estate Trends

The commercial real estate market is experiencing a separation, with higher office rents being driven by a demand for quality office spaces in premium locations in central London. Rents surpassing £100 per sq. ft. are becoming more common, with 17 such leases signed in 2024. This comes as businesses compete for premium spaces that help attract employees back to the office, with developers escalating competition by offering amenities such as terraces, green spaces, and proximity to public transport.

As a consequence of this switch in preference, lower-quality office spaces face increasing vacancy rates as tenants shift towards sustainable, high-quality environments. This trend encourages refurbishment and repositioning strategies, creating opportunities for developers to focus on value-add opportunities and sustainable upgrades. At the same time, there is a continued emphasis on sustainability in the construction industry, with increased demand for low-carbon materials, energy-efficient designs, and green building certifications. Developers and contractors are adapting to this by integrating smart technologies and sustainable practices to meet evolving environmental regulations and tenant expectations. As such we’re seeing a growing need for sector specific professionals with expertise in ESG strategy and low-carbon development.

Recruitment and Employment Outlook

The real estate and construction sectors are approaching hiring with caution and precision in 2025. Companies are highly selective, particularly in investment, development, and construction roles, and favour candidates with specialist skills in sustainability, data analytics, and complex project delivery, for example.

But this measured hiring approach isn’t just about balancing growth ambitions with market risks, as it also reflects a shift in what senior talent prioritises regarding career decisions. According to our 2024 EDI & Salary Survey, while competitive pay still matters, it’s no longer the sole driver. Candidates, mostly at the senior level, increasingly value flexibility, work-life balance, and meaningful benefits, with nearly 50% of respondents rating flexible working as essential and over 60% of respondents citing work-life balance as a key factor when considering new opportunities.

This shift in priorities highlights a crucial realisation for employers that offering attractive salaries alone won’t cut it in 2025. Companies looking to attract and retain top talent must think holistically about their value proposition when hiring for new roles. A company culture that supports personal well-being, career development, and clear progression pathways looks to hold far greater appeal than a higher salary without the flexibility or purpose that modern professionals crave.

With skills shortages continuing to challenge the construction sector, businesses must prioritise additional benefits to entice talent, such as upskilling, internal development programs, and inclusive career pathways. These factors are all critical to ensuring businesses attract the talent they need to succeed now and in the future.

Capstone Mentored: Investing In The Future

At Capstone, we’ve always known that finding the right match is about more than ticking boxes on a job description. It’s about building careers and nurturing talent. Over the past year, our MD, Sarah Davenport and the team have seen first-hand how valuable it can be to connect up-and-coming talent with experienced industry professionals who’ve been there, done it, and want to give back.

In response to the evolving needs of the construction, property, and real estate sectors, we are proud to introduce our mentorship program – Capstone Mentored. This initiative is designed to connect rising talents with industry leaders within our network to foster knowledge sharing, skill development, and career advancement.

In joining our program, you can expect:

Personalised mentorship from experienced professionals.
Guidance on navigating market complexities and career challenges.
Opportunities to expand professional networks.
Skill development in key areas like sustainability, data analytics, and project management.

This isn’t about box-ticking. It’s about giving younger professionals the chance to learn from those who’ve already navigated the challenges of the construction and property industries. It’s about sharing stories, insights, and advice that can help someone confidently take that next step in their career.

Whether you’re a seasoned professional looking to give back to the industry or a talented individual seeking guidance, our mentorship program can offer you valuable opportunities for growth and development. For more information, browse through our Capstone Mentored page or contact Sarah Davenport:

✉️ s.davenport@capstone-recruitment.com

📞 020 3757 5000

Cautious Optimism and Strategic Planning

To conclude, while uncertainties remain in the UK property, construction, and real estate markets, the outlook for 2025 is cautiously optimistic. The need to focus on sustainable practices and technology implementation is a priority, with companies that can adapt to market shifts, focus on high-quality assets, and implement strategic hiring plans best positioned to capitalise on emerging opportunities.

At Capstone Recruitment, we’re committed to helping businesses and professionals navigate this evolving landscape. Whether you're seeking top-tier talent to lead new developments, or simply want to stay ahead of the market, Capstone’s specialist recruitment services in Property, Construction, and Real Estate are tailored to help you succeed.