Britain is poised to spearhead the 2024 European real estate boom

The UK is expected to lead a European real estate resurgence this year as international investors reinvest capital into the region’s strained property market. New research from international property firm Savills suggests that an anticipated fall in interest rates and modest economic revival will attract overseas investors looking to capitalize on increasingly attractive pricing levels.

Investors from the US, Israel, Japan, and Taiwan are predicted to spearhead a 20% rebound in real estate investment activity in 2024, injecting capital into markets in Britain, Germany, Spain, and the Netherlands, according to the research.

“Certainly, it looks like we’ve gone beyond the worst and we’re seeing signs of recovery,” Rasheed Hassan, Savills’ head of global cross-border investment, told CNBC. He noted that the UK, one of the most heavily discounted markets, moved “hard and fast” but retains strong fundamentals, including a deep market, easy accessibility, and limited domestic competition.

Britain was ranked as the top European destination for cross-border investment in CBRE’s 2024 European Investor Intentions Survey, with investors highlighting its discounted rates and high return potential. Germany, Poland, Spain, and the Netherlands followed. London was deemed the most attractive city, followed by Paris, Madrid, Amsterdam, and Berlin.

“London consistently demonstrates resilience against challenging economic headwinds and remains a major focal point for global capital,” said Chris Brett, managing director of CBRE’s European capital markets division.

The UK is forecast to attract one-third, or around $13 billion, of 2024 outbound investment from the US alone, according to estimates from Knight Frank. Germany, Spain, and the Netherlands are expected to be the next biggest beneficiaries of US capital.

This follows a challenging year for real estate in 2023, with higher interest rates increasing borrowing costs and affecting investor sentiment. Global cross-border real estate investment totaled €196.3 billion ($212.9 billion) over the year, down 40% from the five-year average, according to Real Capital Analytics data cited by Savills. The decline was most pronounced in Europe, the Middle East, and Africa (EMEA), where inflows were 59% lower, compared to a 56% drop in the Americas and a 12% dip in Asia Pacific.

In 2023, €65.2 billion ($70.6 billion) was invested in continental Europe, primarily from intra-European cross-border buyers in France and Spain. Only 40% came from outside the continent, the lowest share since 2010.

However, this trend is expected to reverse as international institutions and individual investors return to the market, with the European Central Bank and the Bank of England indicating possible rate cuts.

“We anticipate Europe will likely reclaim its leading position as the foremost destination for cross-border investments in the next 12 to 18 months,” Savills noted.

Residential and warehouse properties, known as “beds and sheds,” are expected to be the biggest beneficiaries of the overseas cash injection in 2024. For the first time, logistics and residential properties have surpassed offices as the preferred asset class for overseas buyers, according to CBRE’s survey. More than one-third (34%) of investors expressed a preference for logistics and 28% for residential, compared to 17% who preferred offices.

This shift follows a 71% decline in office transactions against the five-year average in 2023, amid concerns of a broader commercial property downturn. Nonetheless, Savills’ Hassan noted opportunities remain for “opportunistic investors” looking to take advantage of significant discounts in the office and retail spaces.

“Surprisingly, we’re hearing statements from investors wanting to invest in offices right now. Looking ahead, I think there will be less negativity around offices,” he said.

Source: CNBC