2023 hasn’t exactly been a vintage year for commercial property investment.

In fact, it’s been one of the worst in over a decade. Persistent inflation coupled with a surge in interest rates has had a significant negative impact on economic growth. And as a result, the number of commercial property sales in the UK has plummeted – hitting a record low.

A recent market analysis – conducted in September 2023 – revealed that commercial property transactions were down by 67% over the last 6 months (compared to the 6 months previous), with office space (75%) and retail and leisure transactions (68%) showing the greatest decline.

The question is, what’s the outlook for 2024? Will the commercial property sector continue to struggle? Or will things start to improve in the light of the new year?

Commercial property in 2024 – a tale of two halves

Whilst the lull in sales is likely to continue at the start of the year, industry experts are optimistic about the next 12 months. And there’s good reason to believe that commercial real estate transactions will see a fair (if not remarkable) rebound in 2024.

According to the investment management company, Colliers International, UK commercial property transactions should reach a modest £50 million by the end of the year. Which is a marked improvement on the circa £40 billion recorded in 2023.

The global broker predicts a slow first half of the year, followed by a much-needed recovery in the latter months – when a ‘widely anticipated sense of market stability’ is expected. 

Why are commercial property sales predicted to improve?

  • Opportunistic investments

An ‘opportunistic phase’ of investment is forecast for the start of the year.

Until now, many landlords have been shielded against soaring interest rates by their fixed-rate deals. But as these deals come to an end in 2024, an increasing number of these landlords will face refinancing and higher debt costs – bringing a greater volume of properties onto the market.

At the same time, investors with readily available cash will have a chance to snap up assets – whilst interest rates are still high and the competition is still limited.

  • Interest rate cuts

There’s a growing consensus in the industry that interest rates have already peaked.

Among the experts, it’s now widely believed the Bank of England will make the first cut by mid-May 2024, with interest rates falling gradually and finishing between 4 and 4.25% by the end of the year. 

Of course, this would have a direct impact – reducing debt costs for many investors – and may lead to the return of more lenders and competitive offers to the commercial property market. 

  • A shift in focus

In part, the reduction in sales in 2023 has been due to uncertainty regarding property values.

The pandemic has had a lasting impact on high-street retail and office spaces. Many workplaces are now less reliant on in-person working – adopting either a fully remote or hybrid model instead. Whilst online shopping has become much more popular, making up over 25% of all sales.

As such, the value of these types of commercial property has decreased.

Prospective buyers have become more and more nervous about the possibility of ‘catching a falling knife’. And, as a result, a huge gap has emerged between what investors are willing to pay and what sellers believe their assets are worth – leading to the sharp drop in transactions noted in 2023.

Going forward, it’s likely that investors will turn their attention to sectors with growth prospects, such as industrial and logistics, healthcare and life sciences, and co-working and flexible office space. And moving outside of city centres – for more affordable options – is likely to be a trend.

Interested in investing in commercial property in 2024?

Whilst 2023 can simply be thought of as a year of disrupted recovery after the pandemic, according to the experts, investors should now look into 2024 as a year of great promise.

Plenty of potential investors are likely to be waiting in the wings.

If you’re one of them, we’d love to help. Given the complexity of the commercial market – particularly at this turbulent time – one of the main keys to success is to collaborate with accomplished professionals. And here at St Helens Law, we have experienced commercial property solicitors who can guide you step-by-step through the buying process.

Our commercial conveyancing team prides itself on delivering a proactive and solution-orientated service, with the highest levels of client care. We always ensure completion is reached with minimal stress and minimal delays. And can often act on a fixed fee basis.

An initial consultation is available free of charge. So why not kick off the commercial property investment ‘rebound’? If you’re interested in purchasing commercial real estate in 2024 and need help with conveyancing, please don’t hesitate to get in touch.

You can fill out our online enquiry form and we’ll respond as soon as possible with some suggested times and dates. Or if you have any questions, feel free to give our commercial conveyancing solicitors a call on 01744 742360.