Global Real Estate Perspective November 2024

The economic outlook is broadly positive, with falling inflation freeing central banks to continue to cut interest rates. Lower rates combined with robust labor markets will mean similar or rising GDP growth forecasts for many economies in 2025. While the base case has improved, however, risks continue to rise from geopolitics, conflicts, supply chain threats and the possibility of a resurgence in inflation.

Occupier activity is varied across sectors and markets. Global office leasing volumes rose by 12% from the previous year during Q3, supported by easing monetary policies, moderating downsizing trends and progress on office attendance policies. Retail and hospitality demand remains strong, boosted by rising real wages in many countries and increasing international travel. Signs of greater caution are evident in the in the logistics sector, with occupiers evaluating supply chain strategies and looking to push utilization of their existing footprints higher before committing to new space.

The third quarter proved meaningful in the stabilization of the real estate capital markets, as inflation moderated further and central banks eased monetary policy across many major markets. Investor sentiment continues to improve compared to year-end 2023, and more signals are emerging of a new liquidity cycle in real estate capital markets. Debt origination volumes are trending upward with market activity increases, and lower index rates are improving the cost of debt in most markets globally.

Bidding activity in aggregate further improved during the quarter, although conditions differ across markets due to the current rate environment, while more pricing data points are emerging that show the transactional market is coming off the bottom. Pricing dynamics remain nuanced and varied across markets and sectors. Transaction activity is recovering most quickly in markets where price adjustments are more transparent, led by the U.S. and UK, with global direct investment volumes up 26% year-over-year during the third quarter and 6% year-to-date. Pricing is stabilizing and yields are compressing for in-favor sectors.

As we look ahead, forecasts for economic growth have been revised up, and many major markets are expected to see continued interest rate cuts through 2025. However, risks remain dynamic and likely to result in continued volatility.