UK commercial property investment volumes are on track to increase by 12% in 2024, according to Savills’ latest Market in Minutes report.
The company said investment activity in Q1 2024 reached approximately £8bn and, subject to upward revision, at this trend rate the remainder of 2024 would deliver approximately a 12% increase on the £28.4bn total recorded for the whole of 2023.
Savills added that a major driver of increased investment activity in 2024 could be the regional office market as the sector’s prime yield currently sits higher than that of retail and industrial. The yield gap between London offices and the rest of the UK is also at its highest point in 32 years, at 2.6%.
Richard Merryweather, joint head of UK commercial investment at Savills, said: “With rental levels for top quality offices in regional cities increasing and the yield gap to other prime markets being the largest this century, wider UK offices provide a very interesting opportunity for investors. The yield gap between London and regional offices is at its widest since 1991, so despite there being some headwinds still to dissipate, there is a real opportunity for buyers to take advantage of the difference now, while many geared buyers are finding the cost of debt for this sector prohibitively high.”
Yesterday, Savills data revealed investment transaction volumes in London’s West End reached £1.02bn in Q1 2024. This compares favourably with the £675m recorded in Q1 2023, although the turnover figure for Q1 2024 is 20% down on the five-year average.
Savills said there was ongoing caution amongst buyers and sellers with few deals trades above the £100m mark. The company added there was limited signs of distress and owners were keen to hold out rather than trade at strong discounts.
Paul Cockburn, director, Central London investment at Savills, said: “It feels like it has been a long quarter but liquidity is improving and turnover data is on the up, albeit off a low base. There have been other micro-signals of the mood turning. We are seeing more buyer enquiries and some vendors are taking more aggressive positions on sales. Some values are still at risk, but with greater clarity on pricing coming through, we could be close to the market bottoming out, especially for better quality options.”
