Commercial real estate investment activity in London grew for the second quarter in a row in Q1 2024, according to new data from BNP Paribas Real Estate.
Investment volumes in the capital surged 23% in Q4 2023 to £1.5bn and provisional analysis of Q1 2024 activity shows circa £2.5bn of activity.
Both quarters are still below the long-term average, but BNP said the data indicates the start of the recovery and a new investment cycle.
Charlie Tattersall, senior associate director, research, at BNP Paribas Real Estate, said: “UK real estate markets remain highly-driven by interest rates movements, but attractive fundamentals, including the anticipation of the first base rate cut in June, and signs of a trough in pricing, are gradually bringing more investors back to the market. Almost two years of outward yield shift means some market segments are offering decade-high income returns. Combine this with the window for capital value declines closing, this represents more evidence of the attractiveness of today’s pricing and so capital which has been on the side lines is starting to play.”
Fergus Keane, head of London capital markets at BNP Paribas Real Estate, added: “Confidence has been missing for two years, but if you look at our data on the market, two consecutive quarterly increases in investment volumes certainly signals the start of its return. It’s often only with hindsight that you can see when one cycle ends and another begins, and the trigger is often a spate of deals that turns sentiment and begins to build real momentum. It’s clear to me that some of those moments have arrived.
“There is naturally still hesitation in the market and some are holding out for further evidence that the challenges of 2023 are behind us. A small proportion of investors appear to believe capital values will soften a little further. Another slice appears to be anticipating more bank-led sales at bargain prices, while others are waiting for stock levels to rise, given the fact that some potential sellers think they’ll get a better price later this year. But the activity in the market is increasingly contradicting these positions and I am confident that we are now at the start of a new investing cycle.”
