Global Real Estate Investment to hit $1 Trillion: Savills forecasts rebound

• Global real estate investment projected to rise 7% in 2024, reaching US$747 billion, with further growth to US$952 billion in 2025
• Commercial real estate recovery driven by rate cuts, resilient markets, and investor confidence, with significant growth expected to surpass US$1 trillion by 2026.
• Industrial market outperforms retail and office spaces, with low vacancy rates and accelerating rental growth, especially in Q3 2024.

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Global real estate investment is set to rise significantly, with Savills World Research projecting a 7% increase to US$747 billion in 2024 and further growth to US$952 billion in 2025. By 2026, investment is expected to surpass the US$1 trillion mark for the first time since 2022. Andrew Dewey, MD of Swindon Property, highlights that this recovery is driven by central banks cutting policy rates, diminished fears of a global recession, and resilient occupational markets.

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Institutional investors have expanded their market share to the highest levels since 2021, reaffirming the robust fundamentals of real estate.

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Europe is at the forefront of this recovery, supported by rate-cutting cycles initiated by major central banks during the summer. Commercial real estate is becoming increasingly attractive, with advancements in intelligent building design enhancing working environments and promoting net-zero initiatives.

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Tenant satisfaction is also gaining importance as businesses strive to attract top talent and encourage employees back to the office amid hybrid work trends. In Europe and the US, office attendance peaks on Tuesdays (68% occupancy) and dips on Fridays (43%), reflecting the shift to “peak days.” While similar data is unavailable for South Africa, the “return to office” push has helped reduce vacancy levels in the local office sector.
The industrial property market continues to outperform retail and office spaces due to strong demand. According to the Rode Report, industrial rental growth accelerated in Q3 2024, with vacancy rates at a low 3.6%, below the long-term average of 4.2%. However, balancing high debt costs and returns remains a challenge for buyers, contributing to an uptick in distressed sales, particularly in the auction sector.

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Regionally, Cape Town leads South Africa’s office market recovery, with Q3 rental levels 16% higher than pre-Covid figures in key areas like the V&A Waterfront and Century City. Durban follows, driven by demand in La Lucia/uMhlanga, while Gauteng’s recovery has been slower. Despite this, Johannesburg remains South Africa’s economic hub, hosting the majority of large commercial transactions.

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Looking ahead, recovering business confidence, consistent power supply, and declining interest rates are positive signs for South Africa’s office sector. Limited new construction, due to high vacancy rates and slow economic growth, bodes well for balancing supply and demand. As market dynamics evolve, the focus on sustainable practices and smart management will remain pivotal in shaping the future of commercial real estate.

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