The UK commercial real estate market appears to have turned a corner, with a 26% year-on-year rise in investment volumes recorded in Q2 2024, according to MSCI’s latest Europe Capital Trends report.
UK investment volumes rose to €14.2bn in Q2, which lifted the value of transaction activity by 7% in H1 2024 from the same period in 2023. London was the top investment destination in Europe attracting €8.7bn of deals in H1 – a 4% increase on the same period in 2023.
Investment in UK offices hit an all-time low of just under €2.7bn in H1, with the living sector accounting for slightly more than €10.8bn of UK transactions.
The volume of deals involving UK residential properties hit a two-year high in Q2, with €3.3bn of transactions reported – more than half of which involved student accommodation.
Commercial real estate investment activity levelled off in Q2 2024 across Europe following seven quarters of declines. The UK and some smaller European markets offset the continued weakness of the German and French markets, according MSCI’s data.
The volume of completed transactions in Europe in Q2 declined 2% on the same period in 2023 to €44bn, which took property sales activity in H1 2024 to €82.3bn -10% less than in H1 2023.
Tom Leahy, head of EMEA real rstate research at MSCI, said: “It’s too soon to start celebrating, even if the worst of the downturn since mid-2022 may be behind us. The quarter’s data present a very patchy picture for Europe’s investment markets that is likely to persist in the second half of the year. The office sector remains in the doldrums and in certain markets, notably France and Germany, there is still a gulf in price expectations between buyers and property owners looking to sell.
“The ingredients for a broader-based recovery are gradually coming together, nevertheless. Occupier demand has proved to be broadly resilient in most sectors throughout the downturn and pockets of the European market appear to have re-priced enough to start attracting investors. Prospects of lower interest rates will ease funding and pricing pressures, while there is capital ready for deployment at price points that allow transactions to happen.”
