Investment in UK real estate for the first quarter of 2024 has reached £8 billion, suggests a forecast by Savills that this year could surpass the previous year’s total investment by 12% if the current trend continues. The 2023 total investment was £28.4 billion, and the present rate suggests 2024 might exceed this figure, as outlined in the latest ‘Market in Minutes’ report from Savills.
A significant factor contributing to this predicted increase in investment is the regional office market. Its prime yields are currently more attractive than those in retail and industrial, even though they are typically on par. This difference reflects unique challenges faced by the office sector post-pandemic. Moreover, the gap between yields from London offices and those elsewhere in the UK is the largest it’s been in over three decades, at 2.6%.
Richard Merryweather, Co-Head of UK Commercial Investment at Savills, remarks that the substantial yield gap and the rise in rental rates for quality regional offices present an appealing opportunity for investors. With London and regional offices witnessing the broadest yield gap since 1991, this scenario offers an advantage for potential buyers, despite some persistent market challenges. However, the cost of borrowing for the sector is currently high, which may deter some investors.
For further details and the graph referenced, visit Savills’ website.