Q4 sees surge in demand for investment following interest rates drop

Demand to invest up by 28% across all sectors

The last quarter of 2024 saw a surge in demand for investment in commercial property compared with the same period a year ago, as interest rates drop following the second Bank Rate cut, according to Rightmove’s Quarterly Commercial Insights Tracker.

The latest insights reveal a continued recovery for investment in the sector as interest rates lower and investment opportunities become more affordable and attractive. 

The data for Q4 2024 shows that demand to invest in commercial property of all types was up by 28% by the end of last year, the biggest year-on-year shift since Q2 2021. At a regional level, the biggest increases in demand for commercial property were found in the East Midlands and London.

Andy Miles, Rightmove’s MD of Commercial Real Estate, said: “The second Bank Rate cut has further fuelled the attractiveness to invest in commercial property after a couple of tough years for the sector.”

Christian Smith, Director at Savills, agreed. “We saw a relatively strong and better than expected end to the year, despite the market challenges that remained throughout 2024,” he said. “We saw enquiry numbers increase from start of Q4 right up until Christmas, which bodes well for the start of 2025 and we wait to see if the momentum continues. 

“Businesses are increasingly looking for more comfortable spaces for their employees, leading to many companies upgrading to more modern commercial units. We’re also seeing energy efficiency trends play out, with many companies also looking for more up-to-date space which is more insulated and efficient.”

Ian Humphreys, Founder & CEO at Brickflow, the digital marketplace for specialist property finance, added: “We’re still near the beginning of a global rate-cutting cycle, which is bringing more and more investors back to the commercial property market. As investors look to diversify their portfolio or take strategic views based on planning reforms, commercial property investments are again becoming a popular choice.”

Industrial sector sees a 72% increase in demand from investors

The trend is led by the industrial sector, where Rightmove recorded that demand from investors was 72% higher than in Q4 2023. Experts suggest the continued strength of the industrial sector’s performance is due to continuing growth in e-commerce. 

Leasing demand was 31% ahead of the same three-month period a year ago. “The industrial sector continues to lead the way, with the growth in e-commerce and online shopping turbocharging demand to both invest in and lease industrial space,” Miles said. 

 According to Humphreys, retail’s loss was industrial’s gain. “With the future of the office market still in transition, and retail assets declining in popularity, investors continue to be drawn to the industrial sector, as businesses continue to seek out bigger and modern warehouse space,” he said.

Smith added: “In the industrial sector, we’re seeing good take up of larger distribution facilities over 400,000 square feet, and we’re also seeing healthy levels of take up at around 100,000-200,000 square feet.

“Beneath the headline figures for industrial, the warehouses and logistics sector continues to be the strongest performer compared to the office and retail sectors. We’re also seeing surprising resilience in the manufacturing market. The shift from traditional retail to online is continuing to grow, driving ongoing demand for warehouse space.

The office sector sees a 57% increase in demand

After the industrial sector, the office sector saw the biggest jump in investment demand versus the same period a year ago, at 57%. 

Both supply and demand in the office leasing market remain robust as the UK workforce begins 2025 and some head back to the office more frequently. Demand to lease office space is up by 11% compared to the same three-month period a year ago, the biggest year-on-year jump since 2022, while supply is up by 2%.

Humphreys said: “There is still a major shortage of good quality commercial space that is energy efficient, creating opportunities for the value-add investors. For example, in the office sector, top quality, modern office space is still in high demand from companies, particularly if they are trying to encourage employees to spend more time there.”

About the Commercial Insights Tracker

Rightmove’s Quarterly Commercial Insights Tracker analyses millions of data points from the largest and most engaged commercial audience in the UK in order to track supply and demand over time. Demand is measured by enquiries to commercial agents about listings to lease or to invest in via Rightmove.

Download the Q4 2024 Tracker

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