What the future of the real estate industry tells us about our own futures

CBRE Investment Management have just released a paper with an innocuous title and a quietly explosive implication: U.K. Real Estate in 2040: The Rise of Beds and Technology.

On the surface it’s a sector allocation piece: how the UK real estate ‘investment universe’ is likely to evolve over the next 15 years.

Underneath, it’s something else entirely.

If it’s even approximately right, it’s telling us what kind of country the UK is on track to become:

A ‘beds and infrastructure’ economy, where the dominant asset class is housing and social infrastructure, supported by logistics sheds, with a ‘small but important tech layer’ (data centres and life sciences), and a ‘structurally downgraded role’ for traditional offices and retail.

More than just a capital markets footnote, it’s a sketch of our long-term economic model. And it makes me very worried.

Let’s start with the structural shifts in the real estate universe, and then zoom out to what they imply for the broader economy – and for the choices we face.

A Slow Re-wiring

What the report actually says: the slow re-wiring of the UK investment universe.

CBRE IM start from the IPF’s 2023 estimates of the UK real estate universe, then run six scenarios out to 2040. They flex assumptions about:

• Net addition of floorspace
• Growth in value of stock
• The share of each sector that sits in the investment universe vs owner-occupied or privately held.

Here’s the headline picture by 2040 (base case and scenario ranges):

From “urban core” to “beds-led” universe

Today’s universe is still dominated by the urban legacy:

• Urban (offices + retail): ~ 49% of the investment universe
• Industrial (“sheds”): ~ 34%
• Residential (“beds”): ~ 16%
• Tech (data centres + life sciences): ~ 1%

By 2040, across all scenarios:

Beds become the largest theme:

From 16% today to 32–54% of the universe

46% in the base case

Sheds shrink in share, but not in value:

From 34% today to 21–30% in 2040

Total value of industrial stock actually grows by ~ 47% - just more slowly than other sectors

Urban (offices + retail) halves in share:

From 49% today to 21–30% in 2040

Versus over 80% pre-GFC

Tech grows fastest but remains the smallest:

From ~ 1% today to 4–18% in 2040

5% in the base case; up to 12% in their “strong tech + lower resi penetration” scenario, and 18% in a “turbo tech” world

Two important details:

There is no scenario where beds are not the largest theme.

There is no scenario where tech is not the smallest.

Enormous Growth Potential in Residential

CBRE are very explicit about the drivers:

For beds, the constraint is investor appetite, not underlying demand.

Residential is an enormous underlying stock; only a small slice is currently institutional.

Today, they estimate only 1.5% of affordable and 4% of private rental stock is in the investment universe. But by 2040, they see ranges of 3.8–11.3% (affordable) and 7.5–22.5% (private rental).

Tech Needs Power!

For tech, the constraint is physical capacity - especially grid and water:

They assume 10–20% p.a. floorspace growth for data centres and 5–10% p.a. for life sciences, but note that power and planning constraints will decide where we land in those bands.

Overseas capital passes 50%

Finally, they project the ownership of the universe:

Overseas ownership has already moved from 15% (2003) → 25% (2013) → 40% (2023). They expect it to pass 50% around 2038.
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​A note on overseas ownership: The projected majority overseas ownership by 2038 is politically incendiary whatever its economic merits. Rationally, capital origin doesn't matter—Canadian pension funds and British insurers pursue identical strategies; regulatory architecture determines outcomes, not ownership nationality (see Singapore, Netherlands).

But politics isn't always rational. "Foreign landlords" triggers reflexes that constrain policy options even when the economic critique applies equally to domestic institutions. This makes Autopilot UK harder to defend politically whilst making Rewired UK's regulatory framework more urgent—it must be built before ownership shifts, not retrofitted during a backlash.

We need institutional capital at scale; origin is economically irrelevant. The question is whether we establish strong regulatory frameworks whilst we have political latitude, or wait until ownership patterns trigger nationalist politics that foreclose more sophisticated approaches.

Setting that political complexity aside for a moment, what does the base case actually project?

By 2040…

So by 2040, in their base case, we have:

• A beds-dominated universe (46%),
• Followed by sheds (25%) and urban (24%),
• With a small tech theme (5%),
• And a majority owned by overseas capital.

On its own terms, that’s a reasonable, internally consistent forecast.

But it clearly isn’t just a real estate story.

Whither the UK Economy?

Narrow your eyes and this is just sector rotation. Open them and it’s a sketch of the UK’s future economy. Read these numbers as if they were a macro scenarios document, not an allocation note.

You get something like this:

The UK becomes a ‘beds, meds and bytes’ economy:

• Investing heavily in housing and social infrastructure (beds),
• Keeping a strong base of logistics and industrial (sheds),
• Building a niche but constrained tech infra layer (data centres and labs).
• The historic role of CBD offices and high street retail as the capital market core never returns.
• Urban’s share halves and stays there.
• A large chunk of the built environment, especially mid-quality offices and secondary retail, looks destined for economic obsolescence unless something radical is done.
• The whole system is increasingly owned by overseas capital, collecting rent on life’s essentials.

That equilibrium has characteristics:

• Strong, defensive income streams for investors,
• A real estate industry that wins by serving needs, not wants - housing, health, student beds, infra, logistics,
• A consumption-led, low productivity economic model where a lot of value is captured through rents on non-tradable necessities.

In other words: you can absolutely read this as the architecture of a mature rentier economy.

And for the industry, that’s… not necessarily bad.

THE LOW ROAD

Autopilot UK: the easy path to a rentier future

Let’s be blunt.

If we do nothing more than let today’s incentives run, the CBRE picture is the Autopilot outcome:

• Beds institutionalise
• Housing, affordable, PBSA, senior living, healthcare become the main ballast of institutional portfolios.
• The sector delivers exactly what investors want: long income, low volatility, demand that doesn’t go away in a downturn.

Sheds support consumption:

Logistics and industrial space primarily serve e-commerce, parcel delivery, and supply chains for imported goods. They are productive in an operational sense, but mainly as a distribution layer for a consumption-heavy economy.

Tech stays infra-only:

Data centres and labs grow, but are treated as yielding boxes with power and cooling, not as anchors for new tech ecosystems. Our ability to host compute capacity is capped by the grid; our ambition for what to build on top of it remains limited.

Urban obsolescence accumulates quietly:

Prime offices are refurbished, amenitised, and re-rated. A transitional band of stock is nursed along with capex and ESG upgrades. A large tail of 1980s–2000s offices in secondary locations slowly grind down in value, but rarely get a clean reset. And the same for secondary and tertiary retail.

From a real estate industry standpoint, this might look very attractive:

You end up holding assets people need, not assets you have to persuade them to want. Demand for beds, care, and basic infra is deeply inelastic, and you have repeatable, scalable platforms that match institutional mandates perfectly.

The losers are:

• Owners of obsolete space, especially leveraged office and retail holders who will, eventually, be left “holding the baby”,
• Places whose historic office/retail cores no longer have a clear purpose,
• And, ultimately, households and workers, who see a rising share of their income channelled into rent and basic services, with limited productivity upside.

Layer on the foreign ownership point, and Autopilot UK looks like this:

A country where the dominant investment play is to securitise housing, care and infrastructure; a growing portion of the associated income flows offshore; and much of the remaining commercial stock decays in place.

That is not a forecast of collapse. It’s worse in some ways: a forecast of managed stagnation.

THE HIGH ROAD

There is another route: using the same assets as a modernisation programme.

None of the above is inevitable.

The really interesting thing about CBRE’s work is that the asset mix itself doesn’t have to change for the story to be different.

You can still have:

• Beds at 32–54% of the universe,
• Sheds and urban sharing 40–50% between them,
• Tech at 4–18%,
• Overseas owning more than half the lot,

…and yet end up with a radically different economic and social outcome.

Rewired UK

Call this alternative Rewired UK.

Rewired UK: same pie chart, different country

In Rewired UK, we use the “beds + sheds + tech + stranded offices” mix as a national modernisation programme:

Beds as social infrastructure, not just rent streams

Institutional capital still flows into PRS, affordable, PBSA, senior and healthcare. Beds are still the biggest theme. But those platforms are structured and regulated as social infrastructure:

• Stable, predictable rent regimes;
• Strong quality and energy standards;
• Long-term, mission-driven operating partners: linkage to health, education, and labour-market outcomes.

The same capital that would otherwise fuel a pure rentier model is now paying for decency, efficiency and resilience in the living fabric of the country.

Sheds as a re-industrialisation platform

Logistics and industrial are no longer just “e-commerce plumbing”. Selected corridors and hubs are actively positioned as advanced manufacturing + logistics ecosystems: For robotics and heavy automation, connected to ports and energy assets, and tied into skills programmes and R&D.

The same 21–30% allocation to sheds becomes a platform for tradable production, not just parcel throughput.

Tech as anchor, not footnote

Data centres and labs are treated as anchors for innovation districts, not isolated boxes:

• Co-located with AI and cloud engineering teams,
• Adjacent to universities and FE colleges,
• Surrounded by flexible offices, labs and maker space.
• Grid upgrades and planning consents are conditional on local ecosystem commitments, not just rent rolls.

Stranded offices as a national retrofitting and repurposing fund

Instead of leaving obsolete offices to quietly depreciate, we treat them as raw material:

• Some become housing, care, PBSA;
• Some become creative and startup space;
• Some become civic, health or education hubs;
• Some are demolished to fix bad street grids and open up new mixed-use plots.

AI, modular construction and standardised pattern books could dramatically lower the transaction and design costs of these transformations and is something the industry is barely beginning to exploit.

Exactly the same asset themes - beds, sheds, tech, urban - suddenly support a very different national story:

Higher productivity, because the space we provide is a complement to high-value work, not a drag on it.

Better social outcomes, because housing and care are treated as infrastructure, not pure yield.

Healthier regional economies, because stranded stock is repurposed deliberately, not left to rot.

The difference is not the content in the CBRE spreadsheet. It is what we choose to do with it.

This really is a choice – and doing nothing IS a decision

What bothers me about the CBRE report is not the analysis itself. On its own terms, it’s thoughtful, careful, and methodologically transparent.

What bothers me is how easy it would be for the industry and the policy world to treat it as ‘just how things are’:

• To optimise portfolios for the ‘Autopilot UK’ scenario,
• To quietly accept that a residential-dominated, foreign-owned universe is an unalloyed good for the sector,
• To wave away the obsolescence problem as someone else’s write-down, some time later.

But that isn’t a neutral stance. It’s a choice.

We are, implicitly, choosing between two futures built on the same basic building blocks:

Autopilot UK

• Real estate as a machine for turning housing, care and infra scarcity into income streams,
• A slow-motion write-off of obsolete offices and retail,
• A consumption-heavy, low-productivity economy,
• A majority of “life infrastructure” owned by overseas capital.

Rewired UK

• Real estate as the backbone of a social and industrial modernisation programme,
• Systematic retrofit and repurposing of stranded stock,
• Housing, health, logistics and tech infra treated as platforms for human capital and productive firms,
• A robust, investible universe that still works for its ultimate users.

The CBRE report doesn’t, and can’t, tell us which of those futures we should pick.

But it does something valuable: it removes the illusion that we are dealing in short-term market noise. The composition of the investment universe is slow-moving, path-dependent, and incredibly hard to reverse once set.

Which means the next decade is not just about:

“Do we like beds and sheds more than offices?”

or

“How many data centres can the grid handle?”

It is about what kind of country those bets add up to.