Affordable housing, urban industrial and logistics assets and debt, potentially present the most rewarding opportunities for investors next year, according to Savills Investment Management’s (Savills IM) 2024 global outlook for real estate investment markets.
Affordable housing continues to be driven by fundamental supply-demand imbalances across all European markets, with average rent levels rising 8.2% across Europe (excluding the UK) and by 10% in the UK (to the year end 30 September 2023).
Against this backdrop, Savills IM says there is an opportunity for institutional investors to deliver much needed new supply in the long term. In the short term, Savills IM says investors should ensure they are not overly reliant on market-rental growth, and should instead focus on affordability and minimising cost leakage.
The company also anticipates rents for modern urban industrial and logistics buildings will grow strongly next year – particularly for those units within or close to major urban areas.
Savills IM also believes that now is an ideal time for real estate investors to consider allocations to real estate debt, with the declining availability of debt financing, real estate yield rerating and rising interest rates creating favourable return conditions for those able to lend.
Alex Jeffrey, chief executive of Savills IM, said: “2024 will likely prove to be another challenging year for real estate investors. However, periods of high market stress will present opportunities to those investors with the requisite market knowledge. We see allocators tilting towards living, industrial and logistics, debt and, in increasingly, natural capital orientated strategies,”
Andrew Allen, global head of research, product strategy and development at Savills IM, added: “Urban industrial and logistics continues to be driven by strong fundamental factors and demand for modern, ESG compliant best-in-class assets create opportunities for investors. Elsewhere in the affordable housing sector, the role of private capital continues to grow in importance as part of the solution in ensuring the continued availability of homes for residents across Europe.
“Debt markets keep providing attractive risk-adjusted returns with strong downside protection. Against a backdrop of heightened cyclical market uncertainty, the stable income provided by senior real estate lending will remain highly attractive to institutional investors.”
