Revealed: The Surge in Commercial Property Investment and What’s Driving It

New insights have revealed that there has been a surge in demand to invest in commercial property as confidence in the sector rises among investors.

The research saw demand to invest in commercial property of all types rise by 28 per cent from the end of 2023 to the end of 2024, the biggest year-on-year shift since Q2 of 2021 following a second consecutive bank rate cut.

At a regional level, East Midlands and London saw the biggest increases in commercial property enquiries with the industrial sector leading the pack as demand for industrial properties soared 72 per cent higher than in Q4 of 2023.

Property experts suggest the industrial sector’s commanding lead results from growth in the online shopping and e-commerce sectors.

Christian Smith, Director at Savills, explains how this change is impacting the market: “The shift from traditional retail to online is continuing to grow, driving ongoing demand for warehouse space.”

The research also revealed record demand within the industrial sector for leasing – up 31 per cent on the same three-month period a year ago.

After the industrial sector, the office sector saw the largest rise in demand, up 57 per cent from the previous year.

Meanwhile, supply and demand in the office sector hold strong as the UK workforce heads back into the office more frequently. In fact, demand to lease office space is up by 11 per cent compared to the same three-month period a year ago, the biggest year-on-year jump since 2022, while supply is up by 2 per cent.

Christian Smith from Savills, commented on the data: “Beneath the headline figures for industrial, the warehouses and logistics sector continues to be the strongest performer compared to the office and retail sectors and we’re also seeing surprising resilience in the manufacturing market.

“Businesses are increasingly looking for more comfortable spaces for their employees, leading to many companies upgrading to more modern commercial units. We’re also seeing energy efficiency trends play out, with many companies also looking for more up-to-date space which is more insulated and efficient.”

The new research was sourced via Rightmove’s Quarterly Commercial Insights Tracker, which measures the demand of enquiries to commercial agents about listings for lease – or to invest in – via the national property portal.

Andy Miles, Rightmove’s MD of Commercial Real Estate, commented: “Lowering interest rates has 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.”

Overall, the data signals a broader recovery in the sector, as lower borrowing costs encourage greater confidence and activity among investors.