Commercial property investment surges as interest rates fall

There has been a big increase in demand for commercial property investment compared to the same period last year, coinciding with recent interest rate reductions by the Bank of England, Rightmove says.

The platform points out that the surge reflects a continued recovery in the investment sector as opportunities become more affordable and appealing.

Its Quarterly Commercial Insights Tracker, which analyses data from the largest and most engaged commercial audience in the UK, monitors supply and demand trends over time.

The data for Q4 2024 demonstrates a 28% year-on-year increase in demand for all types of commercial property investment, marking the most substantial annual shift since Q2 2021.

Commercial property investment

Rightmove says that the East Midlands and London experienced the biggest increases in overall commercial property investment demand.

The industrial sector is driving this trend, with the platform recording record-breaking investment demand.

Demand for industrial investment listings surged by 72% compared to Q4 2023.

Following the industrial sector, the office sector witnessed the largest jump in investment demand, increasing by 57% year-over-year.

Performance of the industrial sector

Property experts attribute the continued strong performance of the industrial sector to the ongoing growth of online shopping and e-commerce.

Rightmove also recorded record-breaking demand within the industrial sector for leasing, surpassing the same period last year by 31%.

Other notable trends include the sustained robustness of supply and demand in the office sector as some employees return to the office more frequently.

Demand for office space leases grew by 11% compared to the same period last year, the largest year-on-year jump since 2022, while supply increased by 2%.

Attractiveness to invest in commercial property

Rightmove’s managing director of commercial real estate, Andy Miles, said: “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.”

NAEA Propertymark’s commercial advisory panel member, Michael Sears, said: “It is encouraging to see that the Bank of England’s interest rate cut has resulted in an increase in demand for commercial property, especially at a time when the retail and office sectors are struggling in general.

“It is clear that there is an appetite among investors for opportunities for industrial sites, and Propertymark’s own Commercial Outlook found that 40% of members forecast an increase in supply in the industrial sector.

“Hopefully, as the base rate continues to decrease in the long-term, it will lead to a thriving commercial property sector for years to come.”

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