- Savills predicts a robust 2024 with a rebound in property investments in Q3.
- Multifamily, logistics, premium offices, and prime retail poised for growth.
- Opportunities mainly lie in high quality assets and retrofitting secondary grade counterparts.
Real estate investment around the globe will pick up in the third quarter of 2024, according to Savills’ World Research 2024 Outlook.
On average, 57% of Savills’ researchers have predicted a moderate to strong bump in investment activity in the coming year.
In fact, this sentiment rose to 70% for multifamily residential property and 66% for industrial and logistics.
Road to recovery to start towards the end of 2024
The recovery in investment activity will likely be guided by several major markets, such as the US and UK. Savills UK director of world research, Paul Tostevin, previously projected that global investment would likely return to longer-term trend levels by the third quarter of 2024, with China and much of Europe doing so in 2025.
The real estate advisory firm has been particularly bullish about global residential market activity. Specifically, they have confidence in the multifamily sector, where demand continues to outpace supply, and the logistics sector, which has been uplifted by its strong fundamentals.
“2024 should be a much better year for global property investors, with a sustained bounce back expected as yields look more attractive, prime rents rise, and repricing starts to re-align buyer and seller expectations in markets where this has yet to be seen,” said director of Savills World Research, Eri Mitsostergiou.
Great year for multifamily sector, as well as premium offices and retail
Worldwide, 90% of Savills’ researchers have anticipated rental growth in the multifamily sector, with 81% expected rent rises over the broader residential market. In terms of logistics, 92% forecasted stable or increasing rental rates, driven by robust consumer demand and a mounting post-COVID-19 manufacturing sector.
“Our researchers are predicting broad parallels in performance between sectors at the ‘prime’ end of each sector. However, there are likely to be more pronounced geographical regional variations among secondary assets,” Mitsostergiou said.
Regarding office and retail, most researchers predicted stable or increasing prime real estate rents; 73% expected a rental rise in premium offices located in city centres, and 81% a bump in the rents of first-rate retail properties with high domestic or tourist traffic.
Respondents were less optimistic about the secondary office market; 70% of respondents predicted rents would either remain the same or fall in the coming year, with any increases in rent contingent upon upgrades.
“While not present in all global regions, where they do exist, researchers have also highlighted that strong drivers of demand and limited supply underpin the considerable investment potential of smaller and less liquid sectors such as data centres, life sciences and education,” Mitsostergiou added.
Savill research’s recommendations for 2024, based on investor strategy
Core and core plus strategies:
- premium CBD offices meeting current occupier requirements
- prime logistics across most markets
- high-quality retail and hotel assets in tourist hotspots, including France, Portugal, Australia, Spain and Singapore
- desirable residential locations in areas undergoing strong urbanisation and intensifying rental demand, like Japan, Singapore, Germany, the UK, Spain, and Italy.
Value-add strategies:
- ‘re-lifing’ offices located in prime locations, notably in Japan, Australia, Spain, the Netherlands, South Korea, Germany, and France
- retrofitting or repositioning prime retail assets for better rental returns, especially in Asia and southern Europe.
Opportunistic strategies:
- office spaces that have the reversionary capabilities, improving their value or yield over time
- strategic management of poorly performing assets, such as the repositioning of ageing shopping malls.
“Market consensus has it that the interest rate cycle has peaked and may decline sometime in the next few quarters. Should this be the case, we are of the view that Singapore’s investment market would correspondingly look brighter in 2024,” said executive director of research and consultancy at Savills Singapore, Alan Cheong.
“Any decline in interest rates would benefit the big-ticket investment property classes where buyers are more interest rate sensitive,” he said.
