Megatrends set to dominate property investment in 2024 - expert panel

Four key ‘megatrends’ are set to dominate investment decisions in 2024 despite the year potentially bringing uncertainty and volatility, a property investment event has heard.

Fisher German’s Annual Property Briefing - hosted by the firm’s head of investment James Routledge - welcomed Rob Martin (global head of investment strategy and research for real assets at Legal & General Investment Management) and leading global economist Dr Rebecca Harding to talk about what forces will drive investment decisions through 2024.

The panellists felt 2024 would be unpredictable due to economic factors such as both interest rates and inflation remaining high, and geopolitical factors like the US and UK elections, the rise of nationalism and conflicts around the world, especially in the Middle East and Ukraine.

However, Martin highlighted four key areas that will shape investors’ decisions in 2024: deglobalisation, digitalisation, demographics, and decarbonisation. 

He said: “Countries around the world are throwing up more barriers to free trade and immigration, all of which will have a knock-on effect on economies.

“The advancement of AI and the need for more and more space for data centres is also showing no sign of slowing down and will frame many decisions in the commercial property market.

“With demographics, I would simply say three words – resi, resi, resi. There is huge potential in purpose-built accommodation in the UK, whether that is student accommodation, or ‘multi-family’ accommodation which is forming a growing proportion of investment fund allocations.

“ESG is still really important, we must not lose sight of it. Occupiers care about it and investors are pricing in ESG capital expenditure when considering commercial property to buy.”

Dr Harding highlighted that growth could be slow in 2024 due to the general uncertainty the year poses, both economically and geopolitically.

She said: “With major elections in the UK, the US and in Europe in 2024, unwise electoral promises could be made to win votes, or an ‘electoral stasis’ may develop where no decisions are made until after new governments are elected.

“This could result in interest rates staying high, and inflation not reducing as expected, negatively affecting demand in the housing and commercial markets.

“On the geopolitical front, we are yet to see what impact the violence in the Red Sea will have on global trade and associated markets, such as oil prices. Conflicts in the Middle East and Ukraine may escalate, putting further pressure on the global economy.

“And while ESG is still very important, reporting requirements are unclear at the moment, potentially resulting in ‘greenhushing’.”

“There is certainly a paradox between who pays for ESG and who gains from it. Investors may be seen to be benefitting more than the planet if the regulatory framework is not consistent or effective.”

Routledge added: “2024 will give investors a lot to consider. The megatrends identified by Rob Martin and the global pressures highlighted by Dr Harding will be the overall drivers of the property investment market, but different sectors and geographical areas will behave differently.

“For example, LGIM has forecast that assets in London and other urban areas could perform more strongly in the period up to 2028. Whilst residential and industrial sectors are set to be the better performing sectors on average, we shouldn’t forget that the office and retail sectors are very diverse, and although adversely impacted by known obsolescence risk, will provide counter cyclical and repurposing opportunities”

“We continue to monitor economic and geopolitical events closely, as well as scrutinise expected ESG legislation, so we can provide the most informed support.

“This year is likely to throw up a lot of uncertainty and volatility, but keeping these megatrends in mind should allow us to negotiate the property markets and provide overall client advice as effectively as we can.”