27th February 2024

2024 – a turning point? 

The recently released UK Commercial Market in Minutes from Savills has identified 2024 as a pivotal year for the commercial property investment market. Expectations are for an uptick in investment volumes versus 2023, after a couple of years of falls, with some strengthening in prime yields also likely. 

Positivity about the year ahead is grounded in expectations that Bank Rate will reduce as the year progresses and beyond, which should ignite purchase opportunities in the sector. Investors will look to buy UK commercial property ‘at the absolute nadir of this cycle to maximise their returns’ according to the report.  

It is also anticipated that optimism in the market is being heightened by sustainability in occupational markets. Last year average and prime rents increased in most logistics markets and prime rents rose in each of the UK’s major office markets. Looking ahead, subdued levels of development will place ‘downward pressure on vacancy rates in all sectors,’ which will result in the delivery of rental growth. 

Looking into 2025, the expectation is that the combination of positive exit yield optimism and a compelling story surrounding rental growth, will see an increasing number of investors returning to the market as confidence improves, and an uptick in demand would be the catalyst to yield recovery.  

Prime warehouse rents up 8% in 2023 

Colliers Industrial and Logistics Team’s latest analysis reveals that prime rents for large distribution warehouses (100,000+ sq. ft) in the UK rose to £11 per sq. ft, marking an 8% year-on-year increase.  

Mid-box and multi-let units also experienced a surge, reaching £14.50 per sq. ft, up 6.3% year-on-year. These rent hikes occurred despite a slowdown in take-up and an uptick in warehouse supply. Large warehouse take-up in 2023 totalled 24 million sq. ft, a 36% year-on-year decline, while supply increased to 38.5 million sq. ft, still below the pre-pandemic ten-year average of 45.2 million sq. ft. 

Confidence returns to Edinburgh and Glasgow office markets 

Although office take-up decreased in Q4 2023, looking ahead, Edinburgh and Glasgow are showing signs of recovery, marked by substantial space requirements from large corporations and a rising demand for flexible office setups, as reported by CBRE. Sustainability credentials are a key factor for businesses selecting new offices. 

The research reveals that 157,807 sq. ft of office space was occupied in Edinburgh during the final quarter, a 3% decline from the previous quarter, with a total of 618,148 sq. ft leased throughout 2023, driven by financial and professional sectors’ demand. Prime rents in Edinburgh have maintained stability at £43 per sq. ft.  

There are also signs of recovery in Glasgow, according to Sarah Hagen CBRE Director, “Once key lettings come forward in the early stages of 2024, we anticipate a surge in activity from those occupiers who once thought they had time on their hands, as supply continues to reduce and competition for best space increases.”  

All details are correct at the time of writing (14/02/24) 

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