Global real estate investment is showing varied trends, with declines in the Americas, surges in Asia-Pacific, and renewed interest in Europe. Despite political uncertainty in Germany and France, European commercial real estate (CRE) is on a gradual recovery path. The European Central Bank’s evolving monetary policy and widening Euribor swap rate differentials to the UK and US are expected to attract further capital inflows.
Vacancy rates, which have risen over the past two years, are expected to stabilise in 2025. However, operating costs remain a challenge, particularly business rates and labour expenses. Freeports and Investment Zones, offering tax efficiencies, could attract increased occupier demand. While rental growth will continue, a slower pace may influence investor strategies on lease terms.
The UK remains a beacon of stability, drawing strong offshore capital, particularly from US investors. Anticipated interest rate cuts of up to 100 basis points could ease household financial pressures and stimulate both residential and commercial property sectors.
The London office market presents a contrasting picture. Leasing demand for high-quality, sustainable office spaces remains strong, with prime rents in the City Core projected to rise by 5.4% over five years and 4.5% in the West End Core. Yet, with a 9.2% vacancy rate across London, supply-demand imbalances persist. Limited availability of prime space is supporting rental growth, and with 2.4 million sq ft under offer at the end of 2024, leasing momentum is expected to continue.
Retail real estate has emerged as the top-performing asset class, with total retail returns forecast to reach 8.9% in 2024. Retail warehousing is driving this growth, and despite rising operational costs, rental increases across all sub-sectors highlight retail’s resilience and investment potential.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
