Savills names essential retail as top pick for 2024

Savills has named the essential retail asset class as one of its top picks to see returns in 2024, adding that the year presents an “opportunity” for commercial investors.

In the firm’s 2024 cross-sector UK forecasts, essential retail was named as one of the most attractive segments for commercial investors, alongside strategic sheds and core offices.

Savills said that food stores and neighbourhood-focused retail look cheap, with population growth, omni-channel retail, and constrained stock all supporting an entrance into the sector for an income-focused strategy.

The real estate services firm added that “opportunistic” investors will continue to be attracted to parts of the retail market by high yields and the medium-term capital growth upside coming from change of use. It added that it does not expect to see a surge in retail investment volumes in 2024, however some prime yield hardening in some sectors and locations is baked into its forecasts for both this year and the next.

Richard Merryweather, Savills joint head of UK investment, said: “The factors that drove falls in UK property values and transaction levels over the last two years are expected to improve in 2024. There will be significant opportunity – especially in the commercial and residential spaces – for investors to buy at the bottom of the market, with a focus on opportunities where capital values have either over-corrected, or where rental growth prospects might be accelerating.

“The UK is one of 40 countries that is expected to have an election in 2024 which often causes investor uncertainty. However, our analysis suggests that although transactional activity is generally lower than normal in the three months prior to the election date, it recovers over the following six months.”

“The rationale for investing in land and property remains good, particularly for investors who are looking for infrastructure-type investments that deliver comparatively predictable income streams over the long term.”

Read more: Lunson Mitchenall’s Neil Hockin on 2023 and his new year predictions.