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Recovery in investment volume of commercial real estate continues
Decline in capital interest creates positive market sentiment
October 10, 2024
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Associate Director of PR
In the third quarter of 2024, €2.5 billion was invested in commercial real estate. An increase of 6% compared to the investment volume in Q3 2023. In total, the investment volume in 2024 now amounts to €7.3 billion, a growth of 30% compared to last year. Real estate advisor CBRE concludes that market recovery is continuing. Supported by a sudden change in the interest rate policy and a sharp drop in capital interest, the investment market for commercial real estate is becoming increasingly active.
Both the number of transactions and the total investment volume have increased in recent quarters in all sectors, except for healthcare real estate. The sectors showing the largest increases in investment volumes are: logistics real estate (21%), offices (17%), retail (14%) and hotels (55%).
119% growth in investment volume in the living market
CBRE records the largest increase in investment volume in the living market. The investment volume of €2.7 billion is 119% higher than the previous year, representing a share of 38% of the total investment volume. This strong increase is largely due to 1 specific transaction that is typical for the market (the Glass portfolio), in which 2,947 houses were purchased with the aim of selling the houses individually on the owner-occupied housing market.
While the focus between 2020 and 2023 was on investments in new construction, it is now clear that the largest part of the investment volume is borne by investments in existing new complexes (64%). These include rows of houses and apartment buildings that are bought with the intention of selling the individual units on the owner-occupied market. This trend is driven by higher financing costs, often coupled with new government policies, leading to a further decrease in the availability of rental properties. The rental stock among (institutional) investors has significantly declined, as the proportion of investments in new construction relative to all living complexes purchased with a ‘unit sales strategy’ has dropped to its lowest point in 12 years.
Expectations
Although the first cuts in the interest rate are still small, they still have a major impact on investor confidence. Capital market rates have fallen sharply, which significantly increases sales dynamic. This translates into a more positive market sentiment with favourable expectations for 2025.
More and more investors see this moment as the time to get back in or become more active in the investment market. The future interest rate reductions in combination with a stronger economic year in 2025 will contribute to both the cash flow improving but also the value of the real estate showing an upward movement after 2.5 years.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2024 revenue). The company has more than 140,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
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