Nascent Economic Recovery Expected in Second Half of 2024, Says CBRE

Modest economic growth expected in 2024 with a rebound forecast in 2025

CBRE is anticipating a nascent economic recovery in H2 2024, with a stronger rebound forecast for 2025, according to CBRE’s UK Real Estate Market Outlook 2024, published today.

As inflation continues on its downward trend in 2024, before reaching its target in 2025, the Bank of England is expected to start cutting rates in the second half of 2024. This will reduce the debt burden on both businesses and households, stimulating growth, according to CBRE Research.

Mortgage rollover poses the biggest risk to growth forecasts, with 850,000 fixed-rate mortgages due for renewal in 2024. These mortgages will be impacted by higher rates at the point of refinance, which could lead to a fall in household incomes, reducing the ability to spend, resulting in lower-than-expected consumption.

At a real estate level, CBRE’s Head of UK Research, Jennet Siebrits is expecting commercial real estate to be more attractive in 2024, with investment prospects set to improve as value declines have stopped in some sectors and slowed in others. “The high interest rate environment along with falling values has created a lack of viability for debt buyers and contributed to a thin market. However, as debt costs fall, this should improve. Equity buyers are set to gain from discounted values, benefitting from favourable net total returns and as yields decompress further, the mismatch between buyers and sellers will close, with transaction activity increasing in 2024.”

However, divergence in performance across property types is likely to persist in 2024 and obsolescence, particularly in older office and retail assets, will be a key challenge for the UK real estate market next year. “The fall in values and rise in financing costs since mid-2022 will reduce opportunities to profitably refurbish or repurpose older stock until market conditions improve,” added Siebrits.

Sustainability will continue to be a focus for the year ahead, with an accelerated transition to net zero across the industry. There will be a period of price discovery as the industry improves its understanding of the cost of sustainability capital expenditures and how sustainable properties perform relative to less sustainable assets. Furthermore, physical climate risks to buildings and infrastructure will be of growing importance to occupiers, investors and lenders and regulation and disclosure will begin to turn its focus to nature and biodiversity.

Overview of key sectors:


In the office market, the interest rate environment has dominated the landscape since the second half of 2022, severely constraining volumes. This is expected to ease in H2 2024, but investment volumes in the first half will remain low. Having moved out in 2023, prime office yields in most office markets will start to compress by the end of 2024. The outlook for the leasing market is more positive, with a supply and demand imbalance for the highest quality buildings in the best locations driving prime rental growth.

Furthermore, the creative industries are expected to return to the market in 2024. Since the end of lockdown, the share of UK office market take-up represented by the creative industries has been steadily falling, as these companies have instead focused on flex space. Although the outlook for flex space demand remains positive, 2024 will be the year many creative occupiers seek a more permanent solution.


Despite a material reduction in occupier expansion and subdued levels of take-up, CBRE anticipates only moderate vacancy rises next year as the volume of space under construction continues to decrease. Counter-cyclical players such as discounter retailers and nearshoring businesses are expected to lead demand, together with 3PLs, which now accounts for 40% of all take-up in the UK. However, the market will become increasingly polarized, with the performance of secondary assets becoming more challenged.


CBRE expects retail pricing to remain attractive versus other commercial sectors in the year ahead. Retail Parks are likely to remain the top choice, with interest in Grocery and Shopping Centres set to continue. With margins remaining under pressure, CBRE anticipates that retailers will continue to encourage consumers to utilise their physical store network to maximise profitability. 

Residential (Build To Rent)

Across the broader Private Rented Sector, the supply and demand imbalance will continue to worsen in 2024. An estimated 15,000 rental properties have now been sold since the start of 2022, when the Bank of England began raising the base rate, and high construction costs, labour shortages and more expensive debt will continue to hinder Build To Rent (BTR) delivery. Data shows that BTR construction starts in H1 2023 were less than half of the level recorded in the same period for 2022, which will significantly reduce levels of completions in 2024. In contrast, demand from tenants will remain strong, which will support rental growth.

Purpose-Built Student Accommodation (PBSA)

A record-high student population and broader demographic trends will continue to drive strong demand for PBSA next year, with falling A-level grades and tighter entry requirements continuing to drive an increase in the number of students attending lower and medium tariff universities. However, the supply of new PBSA will continue to be hampered by several factors, including onerous planning requirements and the need to modernize existing stock, further compounding the current shortfall of 850,000 beds.


Next year could be the first time hotel occupancy rates surpass pre-Covid 2019 levels, with domestic leisure demand expected to be strong. The continued recovery of inbound tourism will further add to demand growth, notably in London. Investment volumes are also set to increase in 2024 and as financing and yields begin to stabilise, the buyer-seller disparity for hotel assets should start to diminish.


Robust trading performance and record investment volumes underpinned a healthy 2023 for the self-storage sector. CBRE anticipates further growth for this maturing asset class next year, with structural change, sociodemographic change and investor appetite to remain strong. However, a lack of investment opportunities will limit investors’ ability to access the market, with partnerships and joint ventures acting as a solution.

Data Centres

CBRE expects take-up in the London data centre market to reach new highs next year, as cloud service providers and enterprises continue to seek capacity. The rapidly evolving use of artificial intelligence will further fuel the need for increased data centre capacity and as a result, organisations hoping to let space will need to consider looking further afield due to declining availability in the primary markets and an acute lack of available power.

Life Sciences

Take-up levels for 2023 remained at a similar level to the year prior, constrained by limited availability of purpose-built commercial lab space. CBRE predicts 2m sq ft of new supply to come to market in 2024 which will support increased take-up levels, particularly in tier one markets such as the golden triangle.

The public policy measures announced in recent months including pension reforms, simplified tax relief and a healthy level of government investment will prove attractive to venture capital firms that are considering providing funding to young, growth companies in the sector.

Siebrits concluded: “A number of maturing asset classes, notably data centres and self- storage, have outperformed expectations, bucking the wider challenges facing real estate investors this year. As we look to 2024, we expect these sectors to benefit from further growth, underpinned by healthy investor appetite, increased demand and strong fundamentals.”