Operational Real Estate Investment Bounces Back, with Further Increases Expected in 2025

Operational Real Estate (OPRE) investment within the UK has made a strong recovery in 2024, with a further rise in investment activity anticipated in 2025, according to new research from global real estate advisor, CBRE. The resurgence demonstrates renewed confidence among investors following a challenging 2023, with most sectors continuing to report robust operational performance.

CBRE’s data shows that investment volumes climbed to £6.3bn year-to-date as at Q3, a 102% increase from the same period in 2023. For the third quarter specifically, OPRE deals accounted for 18.6% of total real estate investment volumes, up from 8.1% when compared to Q3 2023.

Healthcare

Investors remain attracted to the healthcare sector’s strong supply and demand dynamics. CBRE’s research shows that a total of £560m was invested into the UK healthcare sector in Q3 2024, an 83% increase on the same period in 2023.

Investment activity has increased throughout the year with increased interest from all investor types. Year-to-date volumes are in line with 2021 and 2022 reflecting that healthcare demand and supply dynamics remain favourable for a wide variety of investors.

Hotels

Investor confidence in the hotels sector has been driven in recent years by the strong underlying trading performance and increasing demand dynamics leading to continued growth in performance. This confidence has resulted in a strong bounce back in investment volumes in 2024 with £3bn of transactions in the first half of the year, split evenly between the London and provincial markets. Q3 2024 saw £700m transact, this being a decline on Q1 and Q2. The transaction market has been heavily influenced by significant portfolio transactions throughout 2024.

Trading performance through 2024 has been tempered by comparison to 2023 but remains robust, this overlayed with the increase in transactions has seen an increasing investor appetite for hotels from a broadening investor base. However, the market in 2024 has been dominated by an unusually high number of large portfolio transactions. This trend is not expected to continue, so with a resurgence of single asset transactions and fewer portfolio deals in 2025, there will be a marginal decline in overall investment volumes in 2025.

Self Storage

2024 is poised to be the fourth consecutive year of record transaction volumes for the self storage sector. CBRE’s data shows that there has been £510m transacted across the UK so far, with a further £100m under offer that is poised to complete in 2024.

The current volume of transactions under offer demonstrates the strong demand for self storage among REITs, operators and investors, and CBRE anticipates demand to remain robust throughout 2025 as the competitive bidder pool evolves. There is a growing consensus that the sector is reaching an inflection point. It’s no longer dominated by just operators and value-add investors. There is an accelerating interest from core+ capital attracted by secure, long term inflation linked cash flows, robust historic trading performance and strong forward looking growth expectations for the sector as a whole.