Q4 volume was the strongest quarter of 2024 and capped a record year for investment into the living sectors, according to LSH’s latest UK Investment Transactions (UKIT) Report.

Download the latest UKIT Q4 2024 report here in full →

The UK property market secured its strongest outturn since Q3 2022 with £13.1bn of assets changing hands during Q4 2024 - 11% above the five-year quarterly average. A slew of large-scale deals underpinned the decent finish to 2024, with seven transactions over £400m, the highest in eight years and comparing with only two deals of this magnitude in Q3.

The living arena was once again pivotal, with £4.4bn of assets changing hands across its constituent sectors in Q4, 27% ahead of the quarterly trend. This included another remarkable quarter for hotels, with volume of £1.5bn boosted by Q4’s largest overall deal, Baupost Group and KKR’s £900m acquisition of the ADIA UK Hotel Portfolio.

Investment across the  iving sectors was central to UK volumes throughout 2024, with record annual turnover of £18.3bn surpassing 2017’s previous high by 7%. Hotel investment volume of £5.5bn was the highest since 2017, and a record year for BTR, where volume of £5.2bn was boosted in Q4 by Starlight Investments’ £500m purchase of three BTR assets (two in Manchester and one in Basildon) from Renaker.

The record year for living investment provided respectability to volumes amid another challenging year for the market, with total all-sector volume amounting to £46.3bn, up 24% on 2023’s total and only 2% below the five-year average. However, the combined living sectors accounted for an unprecedented 39% of 2024’s volume. If this is discounted, volume across the traditional core sectors of the market was its lowest level since 2011.

Q4 retail volume included a standout quarter for retail warehousing, where volume of £1.4bn was well over twice the trend level and the highest since Q2 2007, boosted by Redevco’s £518m (NIY 6.00%) purchase of the M7 UK Retail Portfolio. However, the revival of interest in shopping centres has been more pronounced of late, with Q4 volume hitting £1.0bn for the first time in eight years, boosted by Land Securities’ £490m (7.50% NIY) purchase of a 92% stake in Liverpool One.

in contrast, 2024 has been nothing short of an annus horribilis for the embattled office sector. UK-wide office volume in Q4 amounted to only £1.8bn, down 44% on average, and brought the annual total for 2024 to a record low of £7.3bn. While all parts of the market were subdued, given its scale, Central London was again the main drag, with Q4 volume of £1.0bn standing 50% below trend and comprising only three deals over £100m.

Despite elevated political uncertainty on both sides of the Atlantic in the final quarter, overseas inflows rebounded by 55% q-on-q to £6.0bn, 4% above trend. North America continues to dominate overseas inflows, with total purchasing of £4.1bn in Q4, led by Baupost/KKR’s aforementioned acquisition of the ADIA Hotel Portfolio.

Investment was very mixed between the domestic-buyer categories. Private propcos were the most acquisitive domestic buyers of 2024, with £3.0bn of purchases in Q4 taking the total for the year to a record high of £10.8bn. Meanwhile, institutional purchasing remained subdued once again in Q4, with acquisitions of £1.0bn standing 42% below average.

Ezra Nahome, CEO of Lambert Smith Hampton, commented:

“A strong finish to 2024 provided a welcome dose of optimism, even if the strength of the recovery last year turned out weaker than expected. Q4 volumes hit their highest level since the ill-fated Truss mini-budget of 2022, the lending environment started to warm up and returns improved on MSCI’s official benchmark.

“But New Year’s events gave us little time to celebrate and the spike in gilt yields brought back memories of what unfolded in 2022. Thankfully, conditions in the financial markets have since settled and, while Q1 may be off colour, I am confident that that 2025 will still mark an improvement upon last year for both activity and performance.

“While the recent bond market wobble will keep some investors on the sidelines, many others will find themselves under renewed pressure to sell, providing a ready supply of income-driven opportunities for equity-backed buyers.

“We should bear in mind that the fundamentals in the occupier markets remain broadly positive, and this extends to offices to some degree. The UK market offers real value when viewed in the international context, especially given the pound’s relative retreat”.

Download the latest UKIT Q4 2024 report here in full →