Colliers anticipates ‘opportunistic’ market in 2024
Colliers said the UK commercial real estate market will enter an “opportunistic phase” in 2024, but has warned that a slow start to the year will likely mean only modest deal flow.
The agency said a weak first half year is expected to leave total transactional volumes at £50bn, with yield expansion stabilising by mid-year with “signs of recompression” later in the year.
The firm expects a first interest-rate cut by mid-2024 with interest rates at 4-4.25% by the end of the year.
Colliers said the UK commercial real estate market will enter an “opportunistic phase” in 2024, but has warned that a slow start to the year will likely mean only modest deal flow.
The agency said a weak first half year is expected to leave total transactional volumes at £50bn, with yield expansion stabilising by mid-year with “signs of recompression” later in the year.
The firm expects a first interest-rate cut by mid-2024 with interest rates at 4-4.25% by the end of the year.
Walter Boettcher, head of research and economics at Colliers, said: “The UK commercial property market will enter an opportunistic phase in H1 2024 as increasing numbers of landlords facing refinance and higher debt costs begin to bring greater volumes of product to the market.
“A further short but sharp increase in yields is also expected in H1 2024, driven in large part by growing ESG concerns. Along with a lower interest rate trajectory this will also contribute to a material increase in transactional activity in H2 2024. As it stands, we expect next year to record transaction volumes of £50bn, still below par but up on the circa £40bn recorded in 2023.”
Laurence Richardson, director in the debt advisory team at Colliers, added: “A growing consensus and the latest swap curves suggest that rates have peaked and may begin to fall in mid- to late 2024. Should cuts come sooner, they may be linked to a darkening economic outlook, so be careful what you wish for.
“Next year, LTVs for senior lending are expected to remain capped generally at 55%. Banks will continue to jostle with resourcing challenges presented by tricky legacy ‘backbook’ transactions while simultaneously wishing to originate new, high-quality transactions in a thin acquisition market. Alternative lenders will still secure attractive risk-adjusted deals due to more flexible risk analysis and underwriting processes than traditional lenders.”
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