Total UK CRE investment volumes reach £50bn in 2024

BNP Paribas Real Estate, part of the BNP Paribas Group, a global leader in financial services, has announced that total commercial real estate investment volumes reached £50bn in 2024.

According to data shared this week, the £50bn figure represents an 23% increase on the 2023 close of £41bn.

The latest 2024 sector specific breakdown is as follows:

  • Retail saw volume rise by a third to almost £9.1bn, securing its biggest year since 2021, due to strong retail park demand and a number of shopping centre deals
  • Residential (including senior living and care homes) recorded a 10% uptick
  • Hotels recorded its highest annual volume in six years due to London portfolio activity
  • Offices decreased 6% to £9.5bn as liquidity challenges continued to impact large lot sizes
  • Thanks to a very strong Q4, industrial & logistics rose 13% and ended the year just below the 10 year average

Charlie Tattersall, Capital Markets Research at BNP Paribas Real Estate commented: “2024 saw a welcome improvement in investment market conditions, but stubborn inflation and recent bond market turmoil have served as a reminder that the recovery will be bumpy.

“Investors are increasingly aware of the inherent opportunity the UK’s leasing market offers to those targeting above-inflation income growth. There is capital ready to deploy and they are looking for a reason to invest, but ultimately greater pricing transparency will be the driving force behind this.”

UK

Simon Williams, Head of National Markets at BNP Paribas Real Estate commented: “We’re in unprecedented territory, a new cycle overlayed with structural shifts in real estate fundamentals.

“The continued demand for high-quality rental stock in the beds sector is a noteworthy trend, with build-to-rent schemes offering investors a stable, long-term opportunity in urban centres. As affordability concerns persist, we expect rental demand to remain strong, supported by ongoing urbanization and housing shortages.

“Industrial and logistics is seeing rental growth continuing to moderate from record highs, but it also remains underpinned by ongoing growth in e-commerce and supply chain optimisation.

“The office markets present a more nuanced picture. While the sector is undergoing a significant transformation, the demand for flexible, sustainable, and well-located spaces is rising. The integration of AI into real estate, particularly in how occupiers evaluate office space, is another trend to watch—helping businesses optimize their portfolios and improve operational efficiency.

“Retail, in particular retail parks, has seen strong year-on-year rise in activity as wage growth and disposable incomes continue rising in real terms. I suspect we’ll see a lot more transactions coming through on this side as investors look to reposition portfolios away from global uncertainty and increase exposure to resilient consumer demand.

Central London

Central London investment totalled £9.2bn last year, with offices making up just under 56% of the total – below the post-GFC average of 70%. However, across the office leasing markets, vacancy rates are stabilising at 10.1% and prime rents held in the City and West End at £82.50 and £160 respectively.

Fergus Keane, Head of Central London Investment at BNP Paribas Real Estate commented: “2024 marked another challenging year for the Central London investment market with office turnover still circa 60% below the long-term average despite a strong 36% year-on-year uptick in volume in Q4. The cost of debt finance has been a significant factor in restricting the market for large lot sizes, and this, as expected, has had a bigger impact on the City.

“Despite this, there continues to be improving investor demand for Central London offices with investors eager to take advantage of historically low pricing. Investor optimism can be attributed to continued occupational rental growth, with prime rents forecasted to grow further amidst a backdrop of constrained supply.

“Nevertheless, the cost of debt will continue to be a key influence on investor sentiment in 2025. Growing concerns over inflation shows we can no longer rely on rate cuts to stimulate liquidity, and the recent turmoil in bond markets shows us that caution is essential. However, for those who remain keen to deploy capital, this arguably extends the window of opportunity as yields stay higher for longer.

“Overall, this year, we expect to see continued activity in the smaller lot size bracket until the cost of debt comes down with an active focus on buildings in core locations close to major transport hubs. For those entrepreneurial investors looking at larger ticket sizes, the buyer side window has been elongated due to concerns around market sentiment. Now that we’re on the other side of this and in a more positive trajectory, the time to deploy capital is now.”