CBRE’s UK Mid-Year Real Estate Market Outlook 2024: Key Takeaways

London, July 10, 2024 – The UK real estate market is poised for a rebound following a challenging period, according to CBRE’s Mid-Year Market Outlook 2024. Encouraged by a decisive General Election result and positive economic indicators, the sector shows signs of recovery.

Economic Turning Point

1. Growth Resumes: The UK economy has returned to growth after a recession in late 2023.
2. Inflation Target Achieved: Inflation now aligns with the Bank of England’s 2% target.
3. Interest Rate Cut Anticipated: The first interest rate cut since March 2023 is likely in August.

General Election Boost

The recent General Election outcome provides further support for recovery:

• Consumer Confidence: Following elections, consumer confidence typically increases by over 70%, positively impacting the real estate market.
• Labour’s Priorities: Labour’s policy focus on housing, infrastructure, and business rates could stimulate real estate activity.

Commercial Real Estate Trends

Gradual Transaction Increase: Real estate transactions are expected to rise gradually due to improving interest rate outlook and pent-up demand.

Debt Market Sentiment: Both bank and non-bank lenders are keen on increasing originations in H2 2024.

Office Market Dynamics:

• Construction Activity: 9.1 million square feet of office development is underway, with central London accounting for 60%.
• Prelet and Under Offer: Despite high construction levels, 40% of the UK’s pipeline to 2028 is already prelet or under offer, driven by occupier demand for quality stock.
• Refurbishments and Sustainability: CBRE expects more refurbishments and material re-use to regenerate obsolete stock sustainably.

Logistics Sector:

• Stable Demand: Third-party logistics operators and manufacturers continue to drive occupier demand.
• Expansion Plans: 58% of occupiers plan expansion in the next three years.
• Vacancy Rate: By year-end, the UK vacancy rate is projected to be 5.5%, below the pre-pandemic 10-year average.

Retail Sentiment:

• Investor Optimism: Positive investor sentiment persists, potentially benefiting retail sub-sectors.
• Occupier Resilience: Little evidence of occupier distress; expansion-focused occupiers target high footfall locations.
• Base Rate Cuts: Forecast base rate cuts may improve pricing for retail properties.

In summary, while challenges remain, the UK real estate market is poised for recovery, driven by economic stability, political clarity, and investor confidence.