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Aerial view of the roof garden of Gasholder Park in King’s Cross, London.
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Research shows investors from the US, Israel, Japan and Taiwan will lead the charge, injecting capital into the UK, Germany, Spain and the Netherlands to spearhead a 20% recovery in real estate investment activity in 2024 It will be.
“Certainly we seem to be over the worst and inching towards recovery,” Rashid Hassan, head of international border investments at Savills, told CNBC.
“The UK is one of the most heavily discounted markets,” he added, adding that the UK had moved “tough and fast” but that the fundamentals – deep markets, easy access and limited domestic competition – were pointed out that it remains intact.
CBRE’s 2024 European Investor Intent Survey ranks the UK as the top destination for cross-border investment in Europe, with investors pointing to its discounted interest rates and potential for higher returns. It was followed by Germany, Poland, Spain and the Netherlands. According to the survey, the most attractive city was London, followed by Paris, Madrid, Amsterdam and Berlin.
Chris Brett, Managing Director of European Capital Markets at CBRE, said: “London is one of the few cities that has consistently shown resilience in the face of difficult economic headwinds, and is a major source of global capital. “It continues to be a focus.”
The UK is currently expected to attract a third of its foreign investment in 2024, or around $13 billion, from the US alone, according to Knight Frank estimates. Germany, Spain and the Netherlands are expected to be the next biggest beneficiaries of the US cash.
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2023 was a tough year for real estate as rising interest rates pushed up borrowing costs and weighed on investor sentiment.
Global cross-border real estate investment totaled 196.3 billion euros ($212.9 billion) for the year, down 40% compared to the five-year average, according to Real Capital Analytics data cited by Savills. The decline was most pronounced in Europe, the Middle East and Africa (EMEA), where inflows fell by 59%. This compares to a 56% decline seen in the Americas and a 12% decline recorded in Asia-Pacific.
A total of 65.2 billion euros ($70.6 billion) was invested in continental Europe in 2023, with the majority coming from intra-European cross-border buyers, primarily France and Spain. Less than half (40%) came from outside the continent, the lowest proportion since 2010.
However, this trend is expected to change as the European Central Bank and Bank of England signal interest rate cuts and international institutions and retail investors return to the market.
“We expect Europe is likely to regain its position as a leading cross-border investment destination within the next 12 to 18 months,” Savills said in a note.
The biggest beneficiaries of foreign capital injections in 2024 are expected to be properties such as beds and sheds, as well as houses and warehouses.
For the first time this year, logistics and residential real estate have surpassed office as the preferred asset class for international buyers, according to CBRE research. More than a third (34%) of investors preferred logistics, 28% preferred residential, and 17% preferred office.
This comes after office transactions fell 71% in 2023 compared to the five-year average, amid concerns about a broader downturn in commercial real estate, according to RCA data.
Still, Savills’ Hassan said options remained for “opportunistic investors” looking to take advantage of deep discounts in the office and retail sectors.
“Surprisingly, we are hearing statements like this.” [from investors] We want to invest in an office right now. “Looking ahead, I think there will be less negative atmosphere around the office,” he said.
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