Thought of the Week
Will discounted non-green assets drive investment in 2024?
January 25, 2024 2 Minute Read
2023 was not a stellar year for real estate investment with volumes down 30% to c. £44bn, and values continuing to fall. At the end of December, capital values across all-property were 22% down from their peak in June 2022, according to the CBRE monthly index.
However, there is room for optimism going into 2024, not least with the prospect of lower inflation and interest rates. Our 2024 investor intention survey, releasing next week, shows that over half of investors expect to increase activity this year. Logistics and residential are the preferred sectors, but office will remain in demand. Opportunistic and value-add remain the most attractive strategies for many UK investors in the current market. These investors will be looking for assets that offer large discounts on historical pricing. There is a good chance that other investors will divest of their non-green assets, so this demand could be matched by discounted offices with poor sustainability credentials.
We know there is high occupier demand for office space with good sustainability credentials, and our sustainability index shows that such assets tend to have higher values and delivered stronger investment performance in recent years. So, where a sustainability retrofit is feasible, there could be chances to add significant value.