The United Kingdom’s commercial property market is showing encouraging signs of a faster recovery compared to the rest of Europe, following a challenging period of high interest rates and changes in office use. According to the Green Street Index, the UK is seeing increased deal volumes and rising property values in the first half of 2024, in contrast to slower activity and modest price gains in Germany and France. While commercial property values across Europe have fallen by nearly 25 percent since their 2022 peak, the UK has outperformed its European counterparts, posting a 1.4 percent rise in values compared to an overall European increase of about 1 percent. UK transaction volumes have also risen by 7 percent, with €26 billion worth of properties changing hands, while continental Europe’s volumes have remained largely unchanged.
The recovery, however, is uneven across different property types. There is strong demand for sectors such as warehouses, residential properties, and hotels, which have seen modest price improvements over the past year. In contrast, the office market continues to lag, with significant declines in values. The UK office market, in particular, recorded its weakest performance in the first half of 2024 since MSCI began tracking it in 2001, with only €4.2 billion worth of transactions. The growth in the UK market has been primarily driven by the sale of apartment buildings, student housing, and hotels, rather than office spaces.
Ben Sanderson, managing director of real estate at Aviva, warned in a Financial Times interview that the recovery could be “k-shaped,” where some properties experience value rebounds while others continue to decline. Investors are becoming more selective, with traditional sectors like office, retail, and industrial real estate still seeing declines in dealmaking across Europe.
The UK’s commercial property market shows promising signs of recovery, though the resurgence is uneven, with certain sectors outperforming others. Investors remain cautious, favouring more resilient property types while traditional sectors continue to face challenges.
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.
