Office investment bounces back 7% in 2024 as total global CRE investment rises
In its annual Review of Global Capital Markets report, the international real estate advisor says that therecovery extends beyond a particular market or region and is not concentrated in one sector. The ‘beds and sheds’, living, industrial & logistics, and hotel sectors all registered growth in turnover over 2024. However, the stabilisation and improvement in office volumes has led Savills to label it a major investment story of 2024, particularly in light of the negative perceptions that the sector has been facing in recent years.
Rasheed Hassan, head of Global Cross Border investment at Savills, comments: “The global reticence we saw around office investment throughout 2023 and much of 2024 was largely based upon negative stories coming out of the US, citing poor occupancy levels, despite the reality of many major office markets around the world experiencing an undersupply in prime space and robust rental growth. We’re now seeing signs of positivity in many American occupational markets and, with offices remaining one of the most investable sectors and macroeconomic conditions stabilising, we’re seeing buyers return to them, as well as the CRE markets more broadly.”
Q4 2024 saw a more than 25% rise in turnover, when looking at all sectors, compared to Q4 2023 from $203bn to $258bn, providing strong momentum going into 2025, says Savills. The average deal size rose by 10% globally in 2024 and major institutions are back in the market, with portfolio and M&A deals rising by nearly 50% in Q4 2024. In terms of geographies, most major markets around the world returned to growth in 2024, with Australia a stand out, underpinned by several major transactions, while growth in South Korea was supported by extremely strong fundamentals in the office sector.
Oliver Salmon, director – Global Capital Markets, Savills World Research, adds: “After a chastening couple of years, the cyclical factors weighing on property values and investment activity are beginning to unwind and the recovery in real estate capital markets should continue to gather momentum. In some markets, 2025 will represent a vintage year and the buying opportunity of this cycle. While the environment for real estate fundraising remains challenging, there’s plenty of dry powder and liquidity will be supported by an increase in motivated sellers and the recycling of capital, as equity funds accelerate disposals after delaying exit through the downturn. As a result, we’re forecasting that global investment will rise by an annualised 20% over the next few years, as liquidity returns to the markets.”