A new year and a brighter future? This is what many are forecasting for the commercial property market in 2024. But growth is set to be uneven. As such, investors will need to target specific real estate to generate good returns.

With commercial property investors happy to put a highly challenging 2023 behind them, the outlook is more positive for the year ahead, although expectations should be tempered as economic recovery remains at a very early stage and is far from guaranteed. The continued fall in interest rates will be key to improvement.

Good returns in office space and retail: where to find them

Office space should prove perkier after a flat 2023, not least as many assets are priced more attractively after the sector’s prolonged slump. However, the choice of assets will be critical for investors, with prime and green office shape expected to generate by far the best returns in line with key workspace trends.

Similarly, the outlook for retail is mixed, with recovery widely expected to be modest. Essential retail looks to be the best bet for investors, in particular food outlets and local-focused retail. The reduction in interest rates and the impact it could have on consumer spending power will be particularly important to the performance of this sector.

Where can investors find growth in residential in 2024?

Residential is forecast to have a better year, not least because of continued strong rental growth as the development of new property remains limited by high costs of borrowing and high material costs.

Despite growing pressure on private landlords, buy to let is set to remain a solid choice for investors, with potential the strongest outside of London. Notably, within this sphere, the increased demands on private landlords should help drive growth in student accommodation.

Logistics and warehousing: where to invest in the year ahead

Improvement in office space, retail and residential, should it happen as forecast, will be warmly embraced, but as in 2023, the engine of growth going forward looks set to be the industrial and warehouse sector.

Underpinning this forecast is the continued growth of e-commerce, with any uptick in consumer spending power as a result of the achievement of the 2% inflation rate target set to further increase momentum. However, within this space, there are key trends that should shape investor decision-making.

As in other sectors, green and local led asset development will be integral to assuring good returns. As the focus on sustainability and being able to demonstrate decarbonisation grows for companies, so will their need for warehousing and logistics with strong environmental profiles.

With regard to locality, so-called “strategic sheds” are set to be hot property in 2024, with accessibility to transport hubs and major urban markets essential factors for retailers. As such, properties in and around larger cities, including London, are likely to be to the fore.

Don’t overlook these commercial property sectors in 2024

In terms of hot picks for 2024, life sciences and healthcare should also be mentioned. While these spaces remains comparatively small, returns look set to continue to be healthy. Better protected against economic headwinds, a lack of existing facilities, longer-term tenants and premium rents, as well as an ageing population should drive growth.

Why the choice of commercial loan and mortgage provider is key

It is early days, but commercial property market forecasts are generally positive. However, economic recovery remains embryonic and growth will be uneven. As such, accessibility, flexibility and affordability will be key when it comes to finance for commercial property investment. This is why the choice of commercial loan and mortgage provider is critical to taking opportunities.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.