Commercial investment volumes in UK hit £4.7bn in March 2024

In March 2024, UK commercial investment volumes reached a peak of £4.7bn, marking the highest level since March 2023 and representing a 56% increase month-on-month, as reported by Savills.

This surge brought first-quarter investment volumes for commercial property up to £10.7bn, continuing the trend of rising volumes for the second consecutive quarter.

The industrial sector has shown signs of potential decoupling between traditional links of rental rates and vacancy levels.

Despite an increase in vacancy rates, annualised rental growth in March 2024 stood at 6.3%, only slightly down from 6.6% in March 2023.

According to Savills’ analysis, vacancy rates would need to reach 10.3% for rental growth to stabilise, contrasting with the end of 2023 MSCI vacancy rate of 6.1%.

Kevin Mofid, director in the commercial research team at Savills, commented on the market’s resilience: “Economic data remains volatile, but the general consensus is that a path to a soft landing is achievable.

“With many markets reaching their expected low points in pricing, we can see investor interest harden which is reflected in the increasing investment volumes.

“While we do expect higher investment volumes in the second half of the year, there will still be further volatility in the short term until there is greater clarity on the timing of the Bank of England base rate cuts later this year.”

Richard Merryweather, joint head of UK commercial investment at Savills, also noted significant trends in the industrial and logistics sector: “The industrial and logistics sector has seen record amounts of investment in recent years.

“However, vacancy rates have started to increase but despite this, we can see rental growth has remained at levels above what we would have expected in the first three months of the year.

“We know that occupier demand for high-quality buildings is strong with 70% of all new leases for Grade A property and we expect rental growth to be maintained across many submarkets and sizes in the industrial sector as occupiers continue to place greater emphasis on ESG.”