The UK’s commercial real estate market is showing signs of a robust recovery, outpacing the rest of Europe after enduring a two-year downturn fueled by high interest rates.
Recent data highlights a resurgence in deal volumes and property values in the UK during the first half of 2024, in stark contrast to the more sluggish recovery seen in other major European markets like Germany and France.
According to market data, commercial real estate values across Europe have fallen by nearly 25% from their peak in 2022.
However, the first half of 2024 has seen a modest recovery, with prices rising by about 1% on average across the continent.
The UK has led the way, with a 1.4% increase in property values, outstripping gains in France and Germany.
The UK’s advantage in the recovery
Industry experts attribute the UK’s faster recovery to several factors, including hopes for political stability following the general election, stronger economic prospects, and rising rents.
Additionally, the UK’s commercial real estate market did not experience the same rapid run-up in prices between the Brexit vote and the market peak in 2022, which has allowed for a quicker recalibration in the current environment.
UK transaction volumes surge, outpacing Europe
One of the most telling indicators of the UK’s recovery is the increase in transaction volumes.
Data from MSCI shows that deal volumes in the UK rose by 7% in the first half of 2024, with €26 billion worth of properties changing hands.
This contrasts sharply with the flatlining transaction volumes across continental Europe.
Several large transactions have bolstered the UK’s market performance. For example, LondonMetric’s takeover of LXI, along with equity raises by listed landlords like Segro, Unite Students, and Great Portland Estates (GPE), have all contributed to the positive momentum.
These companies are looking to capitalize on what many believe will be a sustained recovery in the UK market.
Blackstone (NYSE:BX), one of the world’s largest private equity firms, has also played a significant role in boosting deal activity in the UK.
The firm reported investing approximately $3 billion in European real estate during the first half of 2024, with the largest share of that investment directed toward the UK.
Blackstone’s significant acquisitions in the UK include new homes in partnership with Vistry, a hotel chain, logistics warehouses, and a luxury retail block on New Bond Street.
