Intelligent Investment

Will UK investor activity increase this year?

February 8, 2024 3 Minute Read

By Jen Siebrits Steven Devaney Nick Baring

Business advisor

Reflecting the challenging economic and financial backdrop, UK commercial real estate investment volumes were subdued throughout 2023. However, our 2024 Investor Intentions Survey indicates that confidence may now be returning among investors. 53% of UK-based respondents expect to increase their buying activity in 2024, and only 17% of investors expect to make fewer acquisitions of real estate this year. This is a marked shift from our 2023 results, in which only 31% of UK-based investors thought that their buying activity would increase, while 39% expected it to fall.

Figure 1: Expectations of UK investors as to their purchasing activity in the year ahead

Source: European Investor Intentions Survey, CBRE Research, January 2024

Industrial & logistics was cited as the most popular sector for UK-based investors; 41% identified this sector as their primary target for new investments. The residential sector was the second most preferred (27%), followed by offices with 17% of responses. While the office sector traditionally attracted the largest share of UK investment activity, the industrial & logistics and residential sectors have seen their share of investment volumes rise in recent years, and our results suggest that the trend will continue through 2024. Among respondents targeting the office sector, Grade A offices in prime locations were selected most as the preferred asset type. This is likely to reflect the perceived impact of hybrid working on office demand and the challenges for secondary stock in meeting sustainability requirements.

UK investors were less concerned this year about the prospect of a recession. Instead, the key concern was that interest rates will remain higher for longer. 71% of respondents saw this as one of the major challenges for 2024. Still there are signs that interest rates have peaked, and we expect rates to decline in the second half of 2024. This expectation is mirrored in indicators such as long-term swap rates and bond yields, which have fallen since the time our survey was undertaken in response to positive news about inflation. Other challenges for investment identified by more than half of the UK respondents were a mismatch in buyer and seller expectations and tighter credit availability and loan terms, both of which could slow a recovery in market activity over the year ahead. Our survey results show that investors are focusing on opportunistic and value-add investment strategies as they seek to navigate current market conditions.

Figure 2: Major challenges for real estate investment in 2024

Source: European Investor Intentions Survey, CBRE Research, January 2024

Nearly half of UK investors expect to maintain their overall allocation to real estate during 2024, and a further 36% expect their allocation to increase. However, most respondents do not expect the investment market to return to more normal levels of activity until 2025. As shown in Figure 3, only 19% of investors expect activity in 2024 to return to levels seen before the global rise in interest rates. This mirrors our expectations for the UK economy as we anticipate that growth will begin to recover in the second half of 2024 before gaining momentum in 2025.

Figure 3: When investors expect overall market activity to return to levels registered before the rise in global interest rates

Source: European Investor Intentions Survey, CBRE Research, January 2024

So, while the findings are generally more positive than those from last year’s survey, challenges remain for real estate investors in 2024. The full report for 2024 that is based on responses from investors located throughout Europe can be found here: European Investor Intentions Survey 2024.

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