Market Review by Black Castle Capital In this Market Review by Black Castle Capital Partners, our professional team assess the evolving landscape of UK real estate, identifying key trends and opportunities for investors in the near term. While macroeconomic challenges persist, structural demand drivers and shifting market dynamics present compelling entry points across sectors. Office Sector: Quality Over Quantity The UK office market is undergoing a fundamental transformation. While vacancy rates in London remain above pre - pandemic levels at 10.6%, the overall trend indicates a stabilisation of the market. Prime, ESG - compliant offices in central locations command premium rents, with net effective rates rising 3.2% YoY. Meanwhile, secondary assets face repricing pressures. Black Castle Capital Partners expect continued flight - to - quality trends, with flexible workspace operators and tech firms driving absorption in 2025. Residential: Rental Growth Outpaces Sales UK house prices have stabilised but the rental market remains red - hot. Rents grew 7.4% nationally in the 12 months leading up to May 2025, with major cities like Manchester and Edinburgh seeing large increases. With mortgage affordability constraints limiting first - time buyers, we forecast sustained rental demand, particularly for: • Build - to - Rent (BTR): Institutional investment surpassed £5bn in 2024 for the first time, with regional cities outperforming. • Affordable Housing: Government - backed schemes and housing associations are accelerating delivery to meet chronic undersupply. Industrial & Logistics: Evolving Demand Patterns While logistics capital values corrected, the sector’s fundamentals remain sound. Take - up of warehouse space exceeded 50m sq ft in 2023, though requirements now focus on: • Urban Last - Mile Facilities: Online grocery and quick commerce are driving demand for sub - 50,000 sq ft units. • Sustainable Warehousing: Developers prioritizing net - zero buildings achieve 10 - 15% rental premiums Alternatives: The New Core Investor appetite for alternative assets continues to grow, now representing over 28% of UK real estate investment. Key segments include: • Healthcare Real Estate: Private equity - backed care home operators are expanding portfolios amid aging demographics. • Student Housing : International enrollment rebounds are pushing PBSA occupancy to 98% Conclusion: Strategic Positioning for Recovery Black Castle Capital Partners encourages investors to: 1) Target operational assets with inflation - linked income 2) Position for the next development cycle in undersupplied sectors 3) Leverage government initiatives like Freeport tax incentives The UK real estate market offers selective value, particularly for those able to capitalize on evolving occupier needs and the coming refinancing wave.