Commercial property investment volumes hit their highest level in March since March last year, according to the latest data from Savills.
The £4.7bn of deals recorded in March was a 56% month on month increase and took total investment volumes in Q1 2024 to £10.7bn.
In its latest Market in Minutes report, Savills said markets are expecting inward yield movements this year, which “should stimulate higher investment volumes in the second half of the year”. The retail warehouse, industrial, distribution and London leased hotels segments all saw inward movement of yields in April 2024, meaning the average prime yield now stands at 6.05% – an inward movement of 13 bps since the start of the year.
In its analysis, the company said the industrial sector is displaying a potential decoupling between the historical link between rents and vacancy, with annualised rental growth at 6.3% in March 2024, only marginally down on the 6.6% growth recorded in March 2023, despite rising vacancy levels.
Kevin Mofid, director in the commercial research team at Savills, said: “Economic data remains volatile but the general consensus is that a path to a soft landing is achievable. With many markets reaching their expected low points in pricing, we can see investor interest harden which is reflected in the increasing investment volumes. While we do expect higher investment volumes in the second half of the year, there will still be further volatility in the short term until there is greater clarity on the timing of the Bank of England base rate cuts later this year.”
Richard Merryweather, joint head of UK commercial investment at Savills, added: “The industrial and logistics sector has seen record amounts of investment in recent years. However, vacancy rates have started to increase but despite this we can see rental growth has remained at levels above what we would have expected in the first three months of the year.
“We know that occupier demand for high quality buildings is strong with 70% of all new leases for Grade A property and we expect rental growth to be maintained across many submarkets and sizes in the industrial sector as occupiers continue to place greater emphasis on ESG.”
