Commercial real estate investment volumes reached £50bn in 2024, according to new data from BNP Paribas Real Estate – a 23% increase on the £41bn recorded in 2023.
Retail investment activity rose by a third to almost £9.1bn, making it the biggest year for the sector since 2021, an improvement attributed to strong demand for retail parks and a number of shopping centre deals.
Residential (including senior living and care homes) recorded a 10% uptick in activity, the hotel sector recorded its highest annual volume in six years due to London portfolio activity and the industrial and logistics sector reported a 13% increase, ending the year just below the 10-year average.
However, office investment activity fell 6% to £9.5bn, which BNP Paribas Real Estate said was due to liquidity challenges continuing to impact the sale of larger lots.
Charlie Tattersall, from the capital markets research team at BNP Paribas Real Estate, said: “2024 saw a welcome improvement in investment market conditions, but stubborn inflation and recent bond market turmoil have served as a reminder that the recovery will be bumpy.
“Investors are increasingly aware of the inherent opportunity the UK’s leasing market offers to those targeting above-inflation income growth. There is capital ready to deploy and they are looking for a reason to invest, but ultimately greater pricing transparency will be the driving force behind this.”
Simon Williams, head of national markets at BNP Paribas Real Estate, added: “We’re in unprecedented territory, a new cycle overlayed with structural shifts in real estate fundamentals. The continued demand for high-quality rental stock in the beds sector is a noteworthy trend, with build-to-rent schemes offering investors a stable, long-term opportunity in urban centres. As affordability concerns persist, we expect rental demand to remain strong, supported by ongoing urbanisation and housing shortages.
“Industrial and logistics is seeing rental growth continuing to moderate from record highs, but it also remains underpinned by ongoing growth in e-commerce and supply chain optimisation.
“The office markets present a more nuanced picture. While the sector is undergoing a significant transformation, the demand for flexible, sustainable, and well-located spaces is rising. The integration of AI into real estate, particularly in how occupiers evaluate office space, is another trend to watch, helping businesses optimise their portfolios and improve operational efficiency.
“Retail, in particular retail parks, has seen strong year-on-year rise in activity as wage growth and disposable incomes continue rising in real terms. I suspect we’ll see a lot more transactions coming through on this side as investors look to reposition portfolios away from global uncertainty and increase exposure to resilient consumer demand.”
