Investment Quarterly Q4 2024

Investment in UK commercial property rebounded in Q4 2024 across all but one of the main sectors, with activity in the industrial sector seeing a notable contraction quarter-on-quarter.

Source: Carter Jonas, RCA, CoStar

£12.3bn was traded in Q4 2024. This was 29% up quarter-on-quarter and 30% up year-on-year, but 6% below the five-year quarterly average. The rolling annual total exceeded £40bn for the first time since Q2 2023, but it was 23% below the five-year average of £53.5bn.

Source: Carter Jonas, RCA, CoStar

Similar to the previous quarter, approximately 33% of all investment (excluding multi-regional portfolio deals) occurred in the capital in Q4 2024, which is below the five-year average of 51%. Investors targeted offices but also operational real estate assets such as hotels. Overseas capital continued to support volumes in London, accounting for 54% of the total.

Conversely, investment in the regional markets (UK excluding London) accounted for 67% of the total. The South East region recorded the highest level of investment outside the capital, with circa £1.3bn purchased in Q4 2024, followed by the North West with circa £1bn.

Source: Carter Jonas, RCA, CoStar

The alternative sectors accounted for the largest share of the quarterly UK total at 39%, while the alternative and retail sectors both recorded volumes above the five-year quarterly average. The industrial sector accounted for 16% of the total, whilst offices amounted to 24%, the second highest share of the quarterly UK total.

Source: Carter Jonas, RCA, CoStar

Office

Office investment volumes increased to £2.9bn in the fourth quarter, representing a 35% rise quarter-on-quarter but remaining 17% below the five-year quarterly average. This reflects continued subdued activity in the market for large office assets. Notably, Q4 2024 saw the highest office investment volumes since Q4 2023. However, no transactions exceeded £200m during the quarter, with only seven deals surpassing £100m. High-quality assets dominated activity, accounting for nearly 72% of total office investments in the period.

Most of the quarter's largest deals were in London. The UK-based investor Ashby Capital acquired 90 High Holborn for circa £180m, while 11-12 St James Square was sold for £162m.

Despite the overall weaker investment outside London, there were some large transactions outside the capital. Ashtrom Properties acquired Central Square in Leeds for circa £78m, while Abcam purchased their current premises at Cambridge Biomedical Campus for £125m.

Industrial

Industrial investment dropped by 25% quarter-on-quarter in Q4 2024 to about £2bn, with volumes also 38% below the five-year quarterly average. One of the largest deals was RN3 Partners’ acquisition of a portfolio of three industrial assets in the North West totalling 869,000 sq ft for £180m. Another notable deal was Aermont Capital's acquisition of a 761,000 sq ft Tesco Distribution Warehouse for circa £105m.

Retail

Retail investment surged in the fourth quarter. At £2.6bn, investment was 57% up on the previous quarter and 33% above its five-year quarterly average. Several sizeable prime retail assets supported volumes in the last quarter of 2024, with four big-ticket deals above £250m. Landsec acquired 92% of Liverpool One for £490m, Redevco purchased a portfolio of retail parks for £518m, while Hammerson bought West Quay Shopping Centre in Southampton for £269.5m.

Alternatives

Spending on the alternative sectors picked up in Q4 2024; with £4.8bn transacted, volumes were up 58% quarter-on-quarter, 16% year-on-year and 31% above the five-year quarterly average. Several hotel and built-to-rent deals were completed in the fourth quarter. For example, a joint venture between KKR and Baupost Group acquired a portfolio of 33 hotel assets for circa £900m, while a joint venture between Trinity IM, Oaktree and Partners Group acquired The Standard hotel for £185m. Elsewhere, LRC Europe acquired a BTR portfolio for approximately £120m.

Overseas Investment

Source: Carter Jonas, RCA, CoStar

Overseas investment in UK commercial property totalled £5.5bn in Q4 2024, up 21% quarter-on-quarter and 17% above the five-year quarterly average. It accounted for 45% of total investment, below the 10-year average of 51.9%.

US investors continued to have the highest share of overseas investment in Q4 2024, totalling around £3.4bn, notably above the £2.1bn spent in the previous quarter. Notable deals include KKR’s acquisition of a hotel portfolio worth circa £900m and Golden Tree Asset Management’s acquisition of a mixed-use portfolio of retail, industrial and office assets for circa £310m.

European investors had another strong quarter, ranking second with just under £1bn invested and above the £800m spent in Q3 2024. For example, Dutch-based Redevco acquired a portfolio of 16 retail assets for £518m. Elsewhere, Norges Bank Investment Management (NBIM) acquired a further 10% of The Pollen Estate for £81m and also, in partnership with Prologis, acquired a portfolio of seven logistics properties located in the UK and Europe for £279m, with the UK assets valued at approximately £100m.

The outlook from Ali Rana, Head of National Investment

Initial optimism following the festive break has been tempered by concerns about the risk of further stagnation in the economy, largely as a consequence of the fiscal changes introduced in last year's budget.

Economic data from November showed marginal growth of 0.1%, falling short of expectations of 0.2%. Unless December's data significantly exceeds expectations, Q4 is unlikely to demonstrate notable growth.

However, sentiment around the prospects for interest rate cuts during 2025 has improved slightly since the release of the latest inflation and GDP figures, though it remains less optimistic than at the end of last year.

Investor sentiment in UK real estate remains strong, and we expect a continued improvement in market conditions as the year progresses.

The industrial and residential sectors remain the most favoured among investors, both domestic and international.

Demand for regional offices is showing signs of increased activity, particularly in markets with strong occupier demand for assets that are well-located, possess robust ESG credentials, or are viable for conversion to alternative uses, especially residential.