Top three commercial real estate trends for 2024

After a tough year for commercial property investors, the outlook will be better in 2024, according to an expert.

Ray White Commercial, Head of Research Vanessa Rader said that towards the end of 2024 and into 2025, conditions are likely to improve. However, 2024 will see some trends develop that can benefit investors.

Built-to-rent

With the housing crisis showing no sign of slowing down, there will be growing demand for residential accommodation, Ms Rader said.

She stated that build-to-rent is likely to be a popular choice for commercial investors in 2024, with institutions starting to take notice while private buyers focus on smaller options like unit blocks.

While transaction levels remained subdued in 2023, this is also expected to pick up next year.

Industrial assets

Industrial assets continue to remain resilient despite higher interest rates, driven by record-low vacancy data and ongoing demand.

According to Ms Rader, 2024 is likely to see this trend continue with rental growth to keep rising. However, with the heightened cost of construction impacting the profitability of these assets, more distressed assets will potentially enter the market in 2024.

Given that some new developments have become unviable due to inflated construction costs, there may be opportunities to reposition or retrofit unoccupied assets in the industrial sector, giving investors an affordable foothold in the market.

Alternative assets in the education sector

Alternative assets like medical and childcare have seen strong returns over the past few years. However, values might have surged too high, according to Ms Rader. Despite the escalation in prices in the education and the tertiary sector, she believes it is still a promising area worth looking at for investors.

Universities have increased their demand for space in recent years, taking up offices as alternatives to traditional campuses. However, many institutions continue to hold large, undeveloped plots of land, presenting opportunities for the private sector to develop and add value.