CBRE世邦魏理仕2024年英国房地产市场年中展望报告（英文版）

IntelligentInvestment

UKMidYear

MarketOutlook

2024

REPORTREALESTATE

CBRERESEARCH

IntelligentInvestmentMidYearMarketOutlook2024|UK

Contents

01

02

03

04

05

06

07

EconomicOutlook

InvestmentSustainabilityOffice

Industrial&LogisticsRetail

Residential

(Residential,Affordable

Housing,Purpose-Built

StudentAccommodation)

08OPRE

(Hotels,Leisure&Pubs,Healthcare,SeniorLiving,Roadside&Automotive,SelfStorage)

09DataCentres

10LifeSciences

2CBRERESEARCH©2024CBRE,INC.

IntelligentInvestmentMidYearMarketOutlook2024|UK

Introduction

2024startedwitharenewedsenseofoptimism.Whilethere

wasevidenceofimprovedpositivitywithapick-upinretailsales,

consumerconfidence,andareturntoeconomicgrowth,therehavebeensomelessencouragingsigns.Notably,thepathoftheinflationrateinitiallyfellshortofexpectationsasitallbutlevelledoff,and

investmentvolumeshitarecordlow.Still,aswefindourselvesinthemiddleoftheyear,therearenowstrongersignsofaturningpoint.NowthatinflationhasreachedtheBankofEngland’s2%target,

thelikelihoodofaninterestratecutinAugustishigh.Asthecostoflivingpressuresmoderate,consumerdemandwillrebound.

Overall,theimprovingeconomicbackdropispositiveforbothoccupiersandinvestors,whichshouldstimulateactivity.

And,wearenolongerlivingunderthespectreofanimpending

election.TheLabourpartywonalandslidevictory,securing411

seats.Thisgivesthepartyaclearmandateandcapabilitytodrive

itspolicypriorities.Ouranalysisofconsumerconfidenceshows

itincreasesintheperiodfollowinganelectioninover70%ofthe

time.Weexpectthistrendwillbemirrorednowandsothenew

Governmentwillboostsentimentandprovideafilliptotheeconomy.

Fromarealestateperspective,weparticularlywelcomethe

commitmentmadebytheLabourpartytoreformplanning.Thishasbeenanunderlyingchallengeinourindustryforsometime,withthetimetakentogetresidentialplanningpermissiondoublingoverthelast10years.

Thepartyhasacknowledgedthatradicalsolutionsareneeded

toboosthousingdeliverytothedesired1.5millionhomesoverthetermofthisParliament.ExecutingaNewTownsprogrammewill

bechallenging.ItwillrequiresubstantialGovernmentintervention(suchasredefiningtheGreenBelttogreybelt)andinvestment,

butitisavitalinitiative.Theproposaltomakethemortgage

guaranteeschemepermanentwillalsohelpsupportsomefirst-timebuyerswhootherwisemightnothavebeenabletoraiseadeposit.

Otherinitiativesincludeplanstodriveinfrastructureprojects,

includingallocating£1.8billiontoupgradeportsandbuildsupplychainsintheUK,andareviewofbusinessrates

Collectively,webelievethesepoliciescouldbeadvantageousforbothoccupiersandinvestorsandshouldstimulateactivity.

3

CBRERESEARCH©2024CBRE,INC.

EconomicOutlook

IntelligentInvestmentMidYearMarketOutlook2024|UK

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ECONOMICOUTLOOK

Sofarthisyear

—Inflationcontinueditssteadydescent,falling

from4%attheendof2023totheBankof

England’s2%targetrateinMay.Thiswashelpedbyfallsinfoodpriceinflationandfallsinenergyprices.Still,coreinflationhasremainedsticky,

fallingfrom5.1%to3.5%overthesameperiod,inlargepushedbyservicesinflationnotfallingasmuch;movingfrom6.5%to5.7%.

—TheBankofEnglandbaseratehasremainedunchanged

at5.25%sinceMarch2023.However,marketsentimenthasshiftedtowardsratecuts,withtwomembersvotingtocutratesatthemostrecentmeetinginJune.

—Thelabourmarketremainedsolidbuthasrecently

weakenedslightly.Thelatestdatashowunemploymenthasrisento4.4%,coupledwithafallinnotifiedjobvacancies.

Inaddition,thenumberofpeoplewhoareeconomically

inactiveduetolong-termillnesshasincreasedby750,000

sincetheendof2019.Thishascontributedtotheoverall

labourforcebeingvirtuallystaticsincethen.Thishas

potentiallyexacerbatedupwardspressureonwages.The

indexationoftheNationalMinimumWagehascontributed

tonominalwageinflationremainingabovelong-termaveragelevelsat5.6%(includingbonuses)andthefeedthroughof

thesecostshascontributedtothestickinessofcoreinflation.

—GDPincreasedby0.6%inthefirstquarter.ThiswasawelcomerespitefromthefallsinactivityQ3andQ42023.Thestrengthoftheservicesectorwasakeycomponentofgrowth.

Consumerdemandalsopickedupwithretailsalesbouncingbackafterapoorendto2023.

IntelligentInvestmentMidYearMarketOutlook2024|UK

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ECONOMICOUTLOOK

What’sstilltocome

—AlthoughinflationisnowattheBank’s2%target,weexpectcontinued

domesticinflationarypressuresfortheremainderoftheyear.Thiswillleadtosomevolatilityintheheadlinefigure.Wepredictaslowdeclineinwageincreasesandservicesinflation.Somejobsheddingwillputdownward

pressureonwageinflationandmoveitclosertolong-termaveragelevels.

—TheBankofEnglandwillmaintainacautiousapproachtointerest

ratecutting.Anymovementwillbedatadependent,withMPCmemberskeentoseeinflationandwagegrowthsolidlyanchoredatlowerlevels.

—Overall,therewillbemodestgrowthofaround1%across2024asawhole.Still,momentumwillbuildthroughtheyear,andsoannualGDPatQ4willbehigherat2.0%.

—Themaindriverwillberealincomegrowth.Thiswillreflecttheacutedropininflationandthemoregradualslowdowninnominalwage

growth.Interestratecutswillalsoprovideaboosttoconsumerandbusinessdemand.

—Riskstotheoutlookremaindisruptorstothetrajectoryofinflation.

Domesticallystickywageinflationand,globally,theMiddleEastconflict’sproximitytoenergymarkets,couldbothcausedelaysininterestrate

cuttinganddampenthegrowthoutlook.Thefiscalpositionisunlikelytochangesignificantlyfollowingtheelection.

Investment

IntelligentInvestmentMidYearMarketOutlook2024|UK

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INVESTMENT

SofarthisyearFigure1:Investmentreturnsandinvestmentactivity,2021–2024

—Investmentreturnsforrealestatehaveimproved.Capitalvaluesintheindustrialandretailsectorshavestoppedfalling,andpositivetotalreturnsreappearedat

anallpropertylevel.Yetdivergenceinperformanceacrosssectorsisstillevident.OfficecapitalvaluescontinuedtofallinH12024,whilerentalgrowthwasstrongerfortheindustrialandmultifamilysectorsthaninretailandoffices.

—Transactionactivityhasbeenslowertoimprove,withinvestmentvolumesbelowtheiraveragelevelfromthelastdecade.Whiletherearesignsthatinvestor

interestisnowreturningtothemarket,thishasnotyetcrystalisedintoanotableincreaseindeals.However,activityismoreresilientinthelivingsectorsandtherehasbeenmoreliquidityforsmallerlotsizes.

—TherehasbeenM&AactivityintheUKlistedrealestatemarket,withtwomergersconcludedinH1.ThelistedsectorsawlargeandpersistentdiscountstoNetAssetValuethrough2023andinto2024.Thishasencouragedcompaniestopropose

transactionsandothercorporateactionsthatcancapitaliseondivergencebetweenthestockmarketratingofthesectorandthevalueofthe

underlyingassets.

—Realestatedebtmarketsremainedliquidand,whilehigherinterestrateshaveweighedonmarketactivity,thecostofdebthaseasedoverthelastsixmonths.Loanoriginationscontinuetobedominatedbyrefinancingratherthannew

investments,butthereiscompetitionamonglenderstorefinancehighquality

assets.Distressedsalestoresolvemoredifficultsituationsarestillrelativelyuncommon.

25

20

Volumetraded£bn

15

10

5

0

21Q1

21Q2

21Q3

21Q4

22Q1

22Q2

22Q3

22Q4

23Q1

23Q2

23Q3

23Q4

24Q1

24Q2

InvestmentVolume(LHS)CBREUKMonthlyIndex(RHS)

30

20

Yearonyeartotalreturn(%)

10

0

-10

-20

Source:CBREResearch

IntelligentInvestmentMidYearMarketOutlook2024|UK

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INVESTMENT

What’sstilltocome

—Weexpecttoseetheimprovementininvestmentreturnscontinuethroughthesecondhalfoftheyear,withcapitalvaluesbottomingoutacrossall

sectorsandincomereturncontinuingtodrivepositivetotalreturns.

—Ourresearchhasshownthat

investmentatthetroughofthemarket

shouldbebeneficialforthoseinvestorswithcapacitytoact.

However,investmentintotherightlocationsandassetswillbekey,

asstructuralchangescontinuetoaffectoccupierandinvestordemandindifferentsectors.

—Wealsoexpecttransactionactivitytograduallyincrease.Despite

uncertaintyaroundpricing,animprovingoutlookforinterestrates,

coupledwith18monthsofrelativeinactivity,willleadsomeinvestorstodeploycapitaloncemoreastheylooktorefreshandrepositiontheirrealestateportfolios.

—Thisshould,inturn,facilitatesaleofpropertiesbyinvestorsthatneedtomeetredemptionordebtobligations.Asnotedinour

RealEstateMarket

Outlook2024

,furtherdisposalsofrealestatebyUKdefinedbenefit

pensionfundsarelikelyasmoreschemestransitiontowardsbuyouts.

—Sentimentisimprovingindebtmarketsandbothbankandnon-bank

lendersarelookingtoincreaseoriginationsinthesecondhalfoftheyear.Industrial&logistics,datacentres,andthelivingsectorsarecurrently

mostfavoured,butweexpectliquidityacrossallsectorsforfinancinghigh-quality,well-locatedassetswithstrongsponsors.

—Nonetheless,newlendingwillneedtobebalancedwiththemanagementofrisksinexistingloanbooksasthemarketrecovers.

Sustainability

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SUSTAINABILITY

Sofarthisyear

—TheFinancialConductAuthority(FCA)

introducedtheanti-greenwashingrulefor

allregisteredfinancialfirmsintheUK.It

mandatesthatanysustainability-relatedclaimaboutfinancialproductsorservicesmustbecorrect,clearlycommunicated,andcapableofbeingsupportedbyevidence.Assetmanagersshouldensuremarketingmaterials,reportingtoclientsandpublicdisclosuresareconsistentwiththeanti-greenwashingrule.Breakingthisrulecouldresultinreputationaldamageand

potentialenforcementactionfromtheFCA.

—SinceFebruary,allnewdevelopmentsinEnglandover25m²mustshowtheywillachieve10%biodiversitynetgaintobe

grantedplanningpermission.Despitesome

concernsthe

privatemarketwouldnotbeabletomeet

demandfor

biodiversityunits,CBREisnotawareofthispreventingor

delayingdevelopmentssofar.However,thelimitedavailabilityofbiodiversityunitsforlesscommonhabitats,suchasriversandstreams,hasledsomedeveloperstoadjusttheirplans.

Todate,wehavenotedadeveloperpreferenceforachievingbiodiversitygainonsiteratherthanbuyingoffsiteunitsfromthirdparties.

—Developmentsandnewrenewableenergysourceshavebeendelayedduetolimitedgridcapacity.Duetoabacklogof

connectionandgridreinforcementrequests,insomepartsofthecountrynewcleanenergysourcescannotcomeonlineorbuildingheatingelectrificationcannotbesupported,

delayingprogresstowardsnetzero.Illustratingthesizeof

thebacklog,thetotalconnectionsqueueis

forecasttoreach

800GW

bytheendof2024,overfourtimestheUK’s

anticipatedelectricitydemandin2050.

IntelligentInvestmentMidYearMarketOutlook2024|UK

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SUSTAINABILITY

What’sstilltocome

—Labour’smanifestostronglyhintedatincreasingminimumenergy

efficiencystandardsby2030intheprivaterentedsector.Duetothe

closedeadline,itisreasonabletoexpectthisregulationtobeintroducedin2024.IthasnotbeenrevealedwhichEPCgradewouldbecomethe

minimumrequirement,butanyincreasewillrequireinvestmentfrommanylandlordstopreventtheirpropertiesbecomingillegaltolet.Starting

toimproveenergyefficiencyin2024willhelplandlordsavoidsupplybottlenecksasthedeadlinegetscloser.

—LabourpledgedtocreateGreatBritishEnergywiththeaimof

decarbonisingthepowergrid.GreatBritishEnergywillbecapitalisedwith£8.3bntoinvestinrenewableenergyinfrastructure.Evenifspendingis

weightedtowardstheendoftheParliament,thiscouldstillmeanhundredsofmillionsofpublicmoneyinvestedintogreenenergyinfrastructurein

2024.Thisrepresentsanopportunityforinvestorstoco-investin

infrastructureprojectsandreduceriskbysharingitwiththepublicsector.

—TheUKSustainableDisclosureRequirement(SDR)willbecomemandatoryforFCA-regulatedfirmsinDecember2024.Itaimstofacilitateinvestmentintosustainableproductsbyintroducingsustainability-relatedlabels

anddisclosures.DespitesimilaritiestotheEuropeanSustainableFinanceDisclosureRegulation,theSDRrepresentsanewdisclosuremechanismwhichassetmanagerswillhavetoprepareforiftheyaretoattractcapitaltargetingsustainableinvestmentsintheUK.Firmscanstarttoapply

sustainabilitylabelstoproductsvoluntarilyfromJuly2024,takingthisapproachcouldprovideafirstmover’sadvantage.

Office

IntelligentInvestmentMidYearMarketOutlook2024|UK

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OFFICE

SofarthisyearFigure2:CentralLondonofficeinvestmenttransactionsbysizebandandaveragelot

—Demandforthebestqualityofficespacewithinwelllocated,high

specification,andsustainablebuildingsremainsstrong.Themajority

oflargerofficelettingsoverthepastyearhavebeeninnewdevelopments.Duringthesameperiod,morethanathirdofthetotalCentralLondon

officetake-uptransactedatrentshigherthantheprevailingsubmarketprimelevel.

—Thesupplyofsecondhandspaceisaboveitshistoricaverage,andas

occupierdemandsshifttowardshigherqualitystock,somepoor-quality

unitshavebeenavailableforanextendedperiod.Thesetypesofbuildingsareincreasinglybeingpurchasedwiththeintentionofchangeofusetype.InCentralLondonalone,thishasamountedtomorethan£400mofofficeseitherpurchasedorplacedunderofferduringtheyearsofar.

—Officeinvestmenttransactionvolumeshaveremainedrelativelyweakataroundathirdofthe10-yeartrend.Mutedvolumesreflectuncertaintiesaroundassetpricing,debtcosts,andthepotentialforfurtherinterestratemovements.ThelatestdatashowsthatequitytargetingLondonis

around£19.18bn,41%belowtrendlevels.

—Drivinglowerinvestmentturnoverhasbeentherelativeilliquidityoflargerlotsizes,leadingtoafallinaveragedealsize.WithintheCentralLondon

market,theaveragedealsizehasfallenfrom£88min2018to£28m

now.Justtwodealslargerthan£100mtransactedacrosstheUKduringQ12024,comparedtothefive-yearaverageofnineperquarter.

—Primeyieldsremainunchangedsofarthisyearin6ofthe11UKoffice

marketswetrack.However,intheothermarkets,yieldscontinuedtomoveoutwardsbybetween25-50bps.

350

300

250

Numberoftransactions

200

150

100

50

0

£88m

£49m

£28m

20142015201620172018201920202021202220232024H1

<£25m£25-50m£50-100m£100m+Averagedealsize(RHS)

100

90

80

70

60

£m

50

40

30

20

10

0

Source:CBRE

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OFFICE

What’sstilltocome

—Thereis9.1msqftofofficedevelopmentcurrentlyunderconstructionintheUKwhichcouldcompletethisyear.Ifthesecometofruition,

thisyear'scompletionswillexceedaveragelevels.TheCentralLondonmarketaccountsfornearly60%ofthisupcomingdevelopmentspace.

Despitethehighlevelofcompletionsexpected,increasedoccupierdemandforhigh-qualityspacewillcausethisspacetobeabsorbedquickly.Asa

result,40%oftheUKunderconstructionpipelineto2028isalreadypre-letorunderoffer.Theproportionofpre-letspacevariesbymarketandis

ashighas63%intheCityofLondonand42%inLeeds.

—Wedonotexpectconstructionstartstomaintaintheirrecent

paceduetohighdebtandconstructioncosts,andanincreasinglychallengingplanningenvironment.Therefore,weexpectlower

levelsofdevelopmentcompletionsafter2025.Inthelongerterm,weanticipateahigherpropensityforrefurbishmentsandmaterialre-useinconstructiontosustainablyregenerateobsoletestock.Wealsoexpectmorebuyerstotransactwithanintentionto

repurposeoffices.

—Broadersentimentandinvestmentactivitywillbeboostedbyacut

ininterestratesandstabilisingyields.Followingrepricing,themarketcouldseeanincreaseincoreinvestmentpurchasesasreturnsbecomemoreattractive.

—ThekeygeographieswithcapitaltargetingLondonareEurope(34%)

andEastAsia(25%).AllAsiancapitalaccountedfor40%ofthetotalequitytargetingthemarket.

—Inthemarketsweforecast,weexpectprimeyieldstoremainrelativelyflatfortheremainderofthisyear.

Figure3:UKofficedevelopments,underconstructionpipeline

Millionsqft

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

CompletedU/CLet/UnderOfferU/CAvailable10-yearaveragecompletions

Source:CBRE

Industrial

&Logistics

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INDUSTRIAL&LOGISTICS

Sofarthisyear

—Take-upstartedslowlythisyearbutcaughtupinQ2.Thissaid,thereisstillsomecautioninthemarket,withdealstakinglongertocomplete.Demandcontinuestobeledbythird-partylogisticsoperators,

contributingathirdofalltake-up.Manufacturingoccupiersalsoremainactive,accountingforoveraquarteroftake-upinthefirsthalfof2024.

—ThelatestCBREvacancyratenowstandsat5.75%.Inpriorquarters

thevacancyrisewaslargelydrivenbynewspeculativecompletions,

butinQ2theincreasewasledbyareturnofsecondhandunitstomarket.Thedevelopmentpipelinecontinuestomoderate.Around19msqftofnewspaceiscurrentlyunderconstruction,45%belowthesametimelastyear.

—Primerentshavegrowninmostregionsinthefirsthalfoftheyear,

excludingInnerSouthEast,SouthWestandScotland.However,therateofgrowthhasslowed.Inthe12monthstoQ22024,theUK’sprimerent*grewby7.8%,belowtheprioryear(16.3%).

—InQ12024investmentvolumesincreasedyear-on-year,howeverthis

wasfromalowbase.Volumesremainbelowthepreceding10-year

average,andinvestorscontinuetobeselectiveintheirtargetacquisitions.Withlimitedmovementseeninthedebtmarket,theprimebigboxlogisticyieldhasremainedstableat5.25%.

*Weightedbycapitalvalue

Figure5:UKI&LVacancyRate

6%

5%

4%

3%

2%

1%

0%

Q12023Q22023Q32023Q42023Q12024Q22024

Figure6:UKI&LUnderConstructionPipeline

Millionsqft

50

40

30

20

10

0

Q12023Q22023Q32023Q42023Q12024Q22024

SpeculativeBuilt-to-Suit

Source:CBRE

IntelligentInvestmentMidYearMarketOutlook2024|UK

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