LOOK AHEAD 2024: Property consultants predict investment uplift

Advisers expect to see recovery in transactional activity, as well as rent rises for prime assets.

Property lenders can expect more opportunities to provide acquisition financing next year, if predictions by real estate consultants come to pass. London-headquartered Savills, for example, expects global investment activity to rise during 2024, with a spike in the third quarter.

The firm surveyed researchers from across its global divisions on the prospects for real estate investment in 2024. It reported a consensus among them that the weight of the recovery to the long-term trend will occur in Q3, driven by a recovery in markets including the US and the UK. Overall, 57 percent of its researchers expect to see a moderate-to-strong increase in investment volumes during the year.

They were most optimistic about the residential and logistics sectors, seen as undersupplied across markets, and with the potential for rent rises. In total, 70 percent of the researchers expect a moderate-to-strong increase in multifamily residential, with 66 percent predicting the same for industrial and logistics.

Ninety percent expect rent increases in the multifamily sector, with 92 percent expecting rents to rise or remain stable in the logistics sector. “2024 should be a much better year for global property investors, with a sustained bounce back expected as yields look more attractive, prime rents rise, and repricing starts to re-align buyer and seller expectations in markets where this has yet to be seen,” said Eri Mitsostergiou, director of world research at Savills.

For Europe, real estate adviser Cushman & Wakefield, in its EMEA Outlook 2024: The Tide Is Turning report, put forward its view that a projected real estate market recovery will be driven by central banks approaching the end of their rate hike cycles.

“While risks like persistent inflation remain, baseline forecasts point to measured expansion rather than recession in Europe. The diminished level of transactions in numerous markets has led to a slower phase of price determination, particularly for the office sector,” said Sukhdeep Dhillon, head of EMEA forecasting at the firm.

“But we are beginning to witness swifter price adjustments taking place in the more liquid markets, such as in the UK and the Netherlands. As rate hikes end and cuts commence around Q3 2024, we expect to see a bottoming out for valuations,” she added.

For the UK, property consultant Colliers expects the first interest rate cut from the Bank of England by mid-year, enabling a modest recovery in the UK property market in H2. It predicts transactional volumes to reach £50 billion (€58 billion) in 2024.

“The UK commercial property market will enter an opportunistic phase in H1 2024 as increasing numbers of landlords facing refinance and higher debt costs begin to bring greater volumes of product to the market,” said Walter Boettcher, head of research and economics at Colliers.

“A further short but sharp increase in yields is also expected in H1 2024, driven in large part by growing ESG concerns. Along with a lower interest rate trajectory this will also contribute to a material increase in transactional activity in H2 2024. As it stands, we expect next year to record transaction volumes of £50 billion, still below par but up on the circa £40 billion recorded in 2023,” he added.

Improved market sentiment was echoed by consultancy CBRE, in its UK Real Estate Market Outlook 2024. The firm’s head of UK research, Jennet Siebrits, said commercial real estate will become more attractive in 2024, with investment prospects set to improve as value declines have stopped in some sectors and slowed in others.

“Equity buyers are set to gain from discounted values, benefiting from favourable net total returns and as yields decompress further, the mismatch between buyers and sellers will close, with transaction activity increasing in 2024,” Jennet said.

For another of Europe’s key markets, Germany, a moderate improvement in conditions is forecast by some. In its outlook for the country, Colliers said moderate economic growth and an adjusted financing environment is expected to create improved conditions for property investors. It said it expects to see the key eurozone interest rate fall below 4 percent by the end of the year.

“The financing environment will favour market growth in 2024 with volatility settling in the first half of 2024 followed by a slight drop in debt costs in the second half of the year,” said Achim Degen, chief executive officer of Colliers in Germany. “We expect the possibility of having left the interest rate peak behind us combined with a significantly larger supply of properties to boost market activity, which would send out a positive signal to the entire sector.”

Colliers expects activity in Germany will be boosted as properties are revalued and companies announce insolvency, creating pressure on owners to sell.