2024 looks set to be a year with plenty of opportunities for commercial property investment as inflation eases, markets harden and interest rates look set to finally be cut.

Our job is to understand the commercial property sector, and we have dived into endless reports to draw-out the latest trends.

Here are six of the key points we’ve found that are critical to seizing opportunities in the coming months.

Optimism among global investors

After a turbulent year or so for the British economy, a majority of global real estate fund managers are now optimistic about UK commercial property over the next 12 to 18 months – according to a report from global professional services firm Alvarez & Marsal.

Of 101 fund managers surveyed, 56% hold a positive view of the market, 62% believe the cost of capital will improve and 59% expect investment returns to improve, also.

Transactions growing

Government data indicates property transactions eeked up slowly over 2023 as confidence is slowly returning to the sector.

However, Colliers believes that 2024 transactions will reach just £50 billion –some £10 billion down on 2022.

On the positive side, the firm believes that the first half of the year could represent a solid chance for opportunist investors to grab good value deals thanks to reduced competition, before the market begins to rally in the latter half of 2024.

Eight percent returns available on the right asset classes

Six commercial property classes have been tipped to deliver returns of over eight per cent this year by the real estate services company Savills.

Those assets are: North West buy to lets, London industrial, retail warehouses, UK buy to lets, purpose built student accommodation and central London retail space.

Retail parks are leading the way

Retail warehousing is an asset that has created significant interest in recent months, with the Investors Chronical going as far to ask if it represents the ‘deal of the decade’.

Many real estate investors have turned to out-of-town retail parks as an attractive long-term opportunity.

The likes of British Land, Landsec, and NewRiver have expressed enthusiasm for the asset class, believing it’s been excessively downgraded following the trend towards online shopping.

Yields continue to strengthen

Data from Savills indicates that yields have bounced back significantly following a painful period for British commercial property.

Average Prime Yields have recovered significantly as the sector hardens.

Office space and industrial property now exceed 5%, with retail pushing past 6% – good news for income-focused equity investors looking to seize opportunities in 2024.

Rates could drop to 4% by 2025

Many major analysts expect interest rates to be cut several times this year, with inflation cooling significantly over the back end of 2023.

Rates as low as 4% have been predicted for the year end. However, the latest increase in inflation suggests that there may be some time to go before we see any cuts from the Bank of England.