Real Estate

Savills forecasts commercial property rebound in 2024


Savills has predicted the commercial property market will recover next year as a lack of development supply, the move towards sustainable buildings and the reopening of the Chinese economy support activity even as working habits remain shaken up by the pandemic.

European commercial real estate activity slowed in the final quarter of last year with higher borrowing costs leading to a 60 per cent fall in sales volumes for the high-end property group.

However, Savills’ chief executive Mark Ridley said “2024 should see more positive conditions for real estate market activity and Savills is both retaining its bench strength and investing in advance of such recovery.”

“Investors are starting to understand where [interest rates] might peak and what that’s going to do to debt rates”, he added, saying there was “plenty of dry powder” ready to go back into the market. Prime property is particularly strong with London the “most positive” in terms of international cross-border interest, although he noted that “at this stage, predictions for the full year are characterised by a wide range of possible outcomes”.

Overall the UK-based group reported a 7 per cent rise in revenue to £2.3bn for last year.

Underlying profit before tax fell by about a fifth to £164.6mn as rising inflation pushed up staff wage levels and discretionary costs such as travel and entertainment also rose as markets rebounded post-lockdown. Operating profit was down 16 per cent to £158.2mn, undershooting analysts’ forecasts of £181mn.

Ridley pointed to renewed appetite across China after Beijing relaxed its zero-Covid policies and Hong Kong also eased restrictions, saying investors were “mobilised and ready to go”.

Office occupiers were also taking advantage of the market repricing and moving into better quality premises, he said, adding that there was a lot of “upgrading going on across China”. This was repeated in the US where there had been an increase in leasing volumes, with almost three-quarters of space sought being of a higher quality.

However, Ridley warned that the US was also proving to be the slowest market when it came to workers returning to the office. A recent report by commercial property adviser Cushman & Wakefield found that hybrid working would push US office vacancies 55 per cent above their pre-pandemic levels to a record 1.1bn square feet by 2030.

An increase in Savills’ consultancy services and property management activity bolstered its revenues, which rose 4 per cent and 13 per cent, respectively.

“Although not immune from market volatility . . . these businesses performed well and their strength helped underpin Savills performance overall,” the company said. 

Savills’ shares slipped 4 per cent in early trading.



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