Industrial sector leads growth with soaring demand; office market shows strong recovery
Demand for commercial property investments in the UK surged in late 2024, driven by falling interest rates and a renewed appetite for opportunities in the sector, according to property listing website Rightmove.
The platform’s Quarterly Commercial Insights Tracker showed a 28% year-on-year increase in investment demand across all commercial property types in the fourth quarter of 2024. This marks the strongest annual growth since Q2 2021 and highlights the sector’s ongoing recovery.
The industrial sector led the trend, with demand for industrial property investments soaring 72% compared to Q4 2023. Offices followed with a 57% rise, while regional hotspots for investment included London and the East Midlands.
The industrial sector’s growth reflects the sustained rise of e-commerce, with businesses seeking larger and more modern warehouse spaces. Rightmove also recorded a 31% increase in leasing demand for industrial properties compared to the same period a year earlier.
“Lowering interest rates have further fuelled the attractiveness to invest in commercial property after a couple of tough years for the sector,” said Andy Miles (pictured), managing director of commercial real estate at Rightmove. “The industrial sector continues to lead the way, with the growth in e-commerce and online shopping turbocharging demand to both invest in and lease industrial space.”
Leasing demand for office spaces also rose, up 11% year-on-year in Q4 2024, the largest annual jump since 2022. However, office supply increased only slightly, up 2% over the same period.
“With the future of the office market still in transition, and retail assets declining in popularity, investors continue to be drawn to the industrial sector, as businesses seek bigger and more modern warehouse space,” said Ian Humphreys, founder and chief executive of digital marketplace Brickflow.
Humphreys also pointed to opportunities for value-add investors due to a shortage of energy-efficient commercial spaces.
“In the office sector, top-quality, modern office space is still in high demand from companies, particularly if they are trying to encourage employees to spend more time there,” he added.
Christian Smith, director at property service firm Savills, described the end of 2024 as “relatively strong and better than expected” despite ongoing market challenges. He highlighted robust demand for larger distribution facilities exceeding 400,000 square feet and mid-sized spaces of 100,000-200,000 square feet.
“Businesses are increasingly looking for more comfortable spaces for their employees, leading to many companies upgrading to more modern commercial units,” he explained.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
