Commercial real estate investment volume positive in the first quarter of 2024

In the first quarter of 2024, almost € 2 billion was invested in commercial real estate. This is an increase of 43% compared to the first quarter of 2023, but is 47% below the long-term average. Real estate advisor CBRE concludes that although investor confidence is slowly strengthening, the high financing interest rates and lack of price agreement are still putting a brake on the number of transactions within the real estate investment market.

Office and residential real estate still face uncertainty surrounding pricing

The relatively low investment volume can mainly be explained by the historically low quarterly volumes of residential and office real estate. The residential sector has not yet recovered to the same extent as logistics, for example, due to the persistent lack of price agreement between buyers and sellers. The uncertainty surrounding announced and possible further regulation in the housing market also has a negative effect on interest from (international) real estate investors. Investments in new-build homes in particular are lagging behind, with a share of only 16% in the quarterly residential volume. From 2015 to 2022, this share averaged 57%.

While the long-term average investment volume of offices in the first quarter was still above €700 million, last quarter it was only €230 million, a decrease of almost 68%. However, there is now more price transparency, which can benefit liquidity.

Retail real estate in demand

After a longer period of devaluation since the financial crisis, initial yields for retail now appear to be stabilizing. Retail real estate with a stable tenant, in a good location, therefore appears to be popular with Dutch investors in particular. The total investment volume was €270 million, almost a third of the total retail investment volume of 2023 and therefore striking for a 1st quarter. The investment volume in High Street Retail amounted to €121 million, making it the largest share of the total retail investment volume (44%).

Logistics and industrial sector safe haven for investors

Nearly half of the total investment volume came from the industrial and logistics sector last quarter. Due to the low vacancy rate, limited new supply and rising rents, investors see the sector as a relatively stable refuge in the current real estate market. It resulted in a volume of more than €950 million. The initial yields of high-quality logistics real estate are currently lower than those of top offices. This historic turnaround shows the confidence of investors in this sector.

Due to increasing competition for existing distribution centers due to limited new construction, investors are now deviating from the well-known logistics hotspots. They are also increasingly focusing on other sub-sectors, such as light industrial and smaller-scale city logistics. The popularity of light industrial real estate in particular has been increasing sharply for several quarters due to the great shortage and demand from users.

Figure 2: Increasing share of light industrial real estate within the logistics and industrial sector based on the moving annual average.