Strong Results for UK Real Estate at End of 2024, as All Sectors See Capital Values Rise in December

UK commercial property recorded a total return of 1.1% in December, according to the latest CBRE UK Monthly Index. This was the highest monthly total return for 2024, boosted by a 0.6% increase in capital values over the month. Rental values for all commercial property also increased in December, rising by 0.5%.

For 2024 overall, UK commercial property delivered a total return of 7.7%. Not only was this higher than the total returns seen in 2022 and 2023, but it was also above the average annual return of 7.2% recorded by the CBRE UK Monthly Index since 2000. Both income return and capital value growth contributed positively to total return in 2024, with capital values for all commercial property rising by 1.8% during the year. Meanwhile, rental values for all commercial property rose by 2.9% in 2024.

Retail capital values increased by 0.7% in December, led by Retail Warehouses where capital value growth was 0.9% month on month. Retail rental values rose by 0.2% this month, with rental growth in Retail Warehouses (0.5%) and Shopping Centres (0.1%) countered by a decline of 0.3% in the rental values of Standard Shops. However, total returns were positive across all retail segments, with Retail recording a total return of 1.3% for December and 11.5% across 2024.

Office capital values also increased in December by 0.3%. Central London office capital values rose by 0.1% this month while Outer London/M25 and Rest of UK Offices saw capital values increase by 0.3% and 0.4%, respectively. Office rental values rose by 0.4% in December, with Rest of UK Offices seeing the largest month on month increase at 0.6%. Total returns for the office sector were 0.7% in December, and 2.7% throughout 2024.

The Industrial sector saw the highest increase in capital values in December, with values rising by 0.9%. South East Industrials saw a higher increase in capital values (1.0%) than Rest of UK Industrials (0.8%). This was driven by higher rental value growth of 0.7% compared to 0.4% across the Rest of UK. Total returns for the Industrial sector were 1.3% in December, while total returns for 2024 overall were 9.7%. As for the other sectors, this marked an improvement in performance relative to the previous two years.

Jennet Siebrits, CBRE’s Head of UK Research, said: “These results confirm our view that the market reached a trough in 2024 and that we are now at a turning point. December delivered the highest monthly total return of the year, with rental values for all commercial property also increasing. We are now seeing positive capital value growth across the retail, office, and industrial sectors, which we anticipate will gather momentum throughout the year ahead, as investor sentiment strengthens.”

“As such, we anticipate increased investment into UK real estate in 2025 as investors seek to capitalise on current pricing and improved expectations for total returns over the next few years. While the industrial and living sectors are likely to remain popular, we expect to see increased interest in all sectors as opportunities emerge to suit a range of investment strategies.”