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 * Macro Perspectives
 * Real Estate Debt
 * Value of Space
 * ESG
 * Technology
 * Living
 * Industrial & Logistics
 * Natural Capital
 * Offices
 * Retail

 * Macro Perspectives
 * Real Estate Debt
 * Value of Space
 * ESG
 * Technology
 * Living
 * Industrial & Logistics
 * Natural Capital
 * Offices
 * Retail

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France

Germany

Italy

Luxembourg

Netherlands

Poland

Spain

Sweden

UK

ASIA PACIFIC

Australia

Japan

Singapore

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OUTLOOK 2024


10 ESSENTIAL QUESTIONS FOR REAL ESTATE INVESTORS

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As we look ahead to 2024, we address some questions that will drive our
strategies in the next year and beyond. What are the most promising growth
areas? Why is Natural Capital set to become so vital in the coming years? What
forces are driving the logistics sector and is now the time to invest? Why is
the Living sector showing so much potential and why should investors stay the
course with ESG – despite policymakers changing their tune in some areas? Our
expert analysts share their views.


INTRODUCTION FROM THE CEO

Alex Jeffrey
Chief Executive
Savills Investment Management

Welcome to the Savills Investment Management Outlook report for 2024. It tackles
10 of the most pressing questions facing real estate investors as they assess
their positioning for 2024 and beyond. The questions cover Living, Industrial &
Logistics, Debt, Natural Capital, Technology and more. Here, we reveal our
high-conviction views on the topics that we think present the biggest
opportunities, and challenges, as we approach a new economic cycle, with all the
opportunity that entails. We hope you find them enlightening for your thoughts
in 2024 and beyond.



The night is darkest just before the dawn
The tail end of this cycle is proving to be protracted as policymakers take a
cautious view on inflation. While interest rates may well have peaked, there is
no sign yet of any pivot to cutting, which markets expect at some point in 2024.
Indeed, central banks appear largely cognisant of what Milton Friedman called
the “long and variable lags” between implementing monetary policy changes and
the time they take to have an impact. With that in mind, patience is the
watchword at central banks, implying a higher for-longer policy on rates, with
no respite until probably late next year. Whilst there are challenges presented
by higher interest rates and bond yields, real estate has its place for
investors when it offers a compelling yield, capital protection or indeed
capital growth. On that basis, opportunities are evident within real estate, but
to spot them one needs to focus on the fundamentals and try to ignore the noise
that amplifies only the negative headlines.

A borrower or lender be?
Whilst borrowers will be questioning the accessibility to, and viability of,
their finance, new lenders into the market are increasingly well positioned. As
conventional lenders operate more conservatively, opportunities have opened for
nimble alternative lenders able to fill the gap. We have been capitalising on
opportunities in debt markets, specifically with whole loans and senior loans
where clients are drawn to the capital protection on offer, whilst potentially
benefiting from high risk-adjusted income returns. See pages 6-7 for details.

Stick to the fundamentals
Our analysts covering the Living (Beds) and Industrial & Logistics (Sheds)
sectors recognise strong and growing occupier demand coupled with critical
shortfalls in the quantity and quality of supply. With both sectors starved of
suitable accommodation, they have seen, and will likely continue to see, strong
rental and income growth, particularly in the strongest urban areas. See our
arguments as to why investors should increase relative weightings to ‘Beds and
Sheds’ in 2024 on page 14.

Climate and nature matters, now
Sustainability and Net Zero Carbon discussions are being unsettled by the
economic and political backdrop, but our commitment is resolute. Our long-term
approach remains to become a restorative business by 2050. Think of this as a
step beyond net zero. More immediately, we are committed to short-term measures
to reduce operational (energy) costs and protect against obsolescence due to
regulatory demands that are an imperative for investors right now. We are acting
to improve the climate and the health of the planet on a number of fronts, most
recently by creating a Natural Capital strategy to channel funds into
replenishing biodiversity and limiting global warming.

Out of vogue?
The retail and office sectors remain challenged by ongoing structural and
cyclical issues that will see further value declines. This will reinforce
negative perceptions, but equally could offer potential opportunities from their
repricing. The consensus won’t always be right. Prime buildings in amenity-rich
office and retail locations will retain strong appeal to occupiers and
consequently investors, but we warn that these opportunities are more limited
than many may expect. Supermarkets, with long and secure index-linked leases,
are an attractive segment of an unloved retail sector. See pages 22-23 for more
information.

And don’t just take our word for it.
This year, we have also asked experts from outside our organisation to
supplement our articles with their own views, taking us to task or supporting
our opinions. Thanks to those experts for their contributions to help deepen
investors’ understanding of the challenges we face, and the opportunities that
are there to

OUTLOOK 2024 - 10 ESSENTIAL QUESTIONS FOR REAL ESTATE INVESTORS

Download the report to learn more.

Download Report


10 QUESTIONS FOR INVESTORS IN 2024 AND BEYOND:

Macro Perspectives



01DAWN AFTER DARKNESS IN REAL ESTATE INVESTING?

Focusing on income and rental growth, rather than falling yields, is key to
asset allocation as rates may remain elevated for some time.

Real Estate Debt



02IS NOW THE TIME FOR REAL ESTATE DEBT?

There is an array of effective debt strategies that work to preserve capital and
provide attractive risk-adjusted returns. Have you considered how it fits in
your portfolio?

The Value of Space



03IS SPACE THE FINAL FRONTIER IN SETTING REAL ESTATE ALLOCATIONS?

Few investors consider the implications of technology in real estate and its
impact on productivity – we consider it an invisible supply dynamic that
investors must assess.

ESG



04WILL ESG FADE AS COST SENSITIVITIES RISE?

While policymakers seem reluctant to impose ESG costs during a cost-of-living
crisis, we argue that short-term measures such as insulation and energy
efficiency can pay quick dividends.

Technology



05IS TECHNOLOGY DISRUPTING THE ALREADY DISRUPTED?

While the potential of AI is making headlines, investors need to get their data
in order to maximise the benefits of AI on their portfolios and decision making.

Living



06WHAT CAN LANDLORDS DO ABOUT RENTER AFFORDABILITY?

There’s no quick fix for property supply, but preventing cost leakage on
existing properties and focusing on retaining tenants for longer could help cut
renovation costs during voids.

Industrial and Logistics



07WHAT ARE THE FORCES DRIVING INDUSTRIAL & LOGISTICS GROWTH?

A focus on assets in or near urban centres is driving up both rental growth and
land prices - while also saving tenants costs on fuel and distribution.

Natural Capital



08WHY INVEST IN NATURAL CAPITAL?

Capturing carbon from the atmosphere, and preserving and restoring the UK’s
forestry and farmland, is essential for meeting net zero targets.

Offices



09IS THERE A FUTURE FOR OFFICE INVESTMENT?

Prime offices remain in high demand but those in secondary locations or lacking
ESG credentials may be best avoided. Investors may need to rethink their office
strategies.

Retail



10WHERE SHOULD INVESTORS SHOP FOR RETURNS?

Footfall has returned in many of Europe’s prime shopping locations, and thanks
to a repricing, retail now offers some of the highest yields in real estate.

OUTLOOK 2024 - 10 ESSENTIAL QUESTIONS FOR REAL ESTATE INVESTORS

Download the report to learn more.

Download Report


GET IN TOUCH

Thank you for your interest in the Outlook 2024 report. Please get in touch with
us by email to learn more: marketing@savillsim.com


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