There’s been a surge in demand to invest in commercial property after interest rates dropped following the latest base rate cut in November, Rightmove’s quarterly commercial insights tracker has revealed.
The data for Q4 2024 shows that demand to invest in commercial property of all types was up by 28% by the end of last year, the biggest year-on-year shift since Q2 2021.
Demand is measured by enquiries to commercial agents about listings for lease, or to invest in via Rightmove.
At a regional level, the biggest increases to invest in commercial property overall are the East Midlands and London.
Andy Miles, Rightmove’s managing director of commercial real estate, said: “We’re still near the beginning of a global rate-cutting cycle, which is bringing more and more investors back to the commercial property market.
“As investors look to diversify their portfolio or take strategic views based on planning reforms, commercial property investments are again becoming a popular choice.
“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 continue to seek out bigger and modern warehouse space.
“There is also still a major shortage of good quality commercial space that is energy efficient, creating opportunities for the value-add investors. For example, 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.”
In November the Bank of England cut the base rate to 4.75%. Two further cuts are expected in 2025.
Commercial investment is led by the industrial sector, where Rightmove recorded record demand to invest in the sector. Demand for industrial listings to invest in was 72% higher than in Q4 2023.
After the industrial sector, the office sector has seen the biggest jump in investment demand versus the same period a year ago at +57%.
Experts suggest the continued strength of the industrial sector’s performance comes as online shopping trends and e-commerce continue to grow, explaining why data movements are mirrored within the leasing market.
Rightmove also saw record demand within the industrial sector for leasing and is 31% ahead of the same three-month period a year ago.
In other trends, supply and demand in the office sector remains robust as the UK workforce begins 2025 and some head back to the office more frequently.
Demand to lease office space is up by 11% compared to the same three-month period a year ago, the biggest year-on-year jump since 2022, while supply is up by 2%.
Miles added: “Lowering interest rates have further fuelled the attractiveness to invest in commercial property after a couple of tough years for the sector.
“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.”