Nearly three-quarters of Savills researchers from around the world are expecting investment activity in their markets to improve next year, with a similar proportion also anticipating a recovery in capital values.
Savills has already forecast global real estate investment turnover to rise 27% to $952 bn (€900 bn) in 2025 and surpass the $1 trn mark by 2026. In its annual survey of its 33 heads of research, it found an increase in positivity towards transaction activity in all sectors in the next 12 months.
Key sectors
Savills researchers are most optimistic about prime offices: 81% anticipate rental growth in the sector, with 91% forecasting rising levels of leasing activity. Rental growth expectations for 2025 are strongest in Saudi Arabia, the UAE, India, the UK, and Spain.
Savills has also grown more positive on secondary offices: with the repricing in these asset values having largely run its course, the adviser says secondary offices are now likely to attract value add and opportunistic investors. While the market will remain challenging, Savills researchers foresee modest rises in rents and take-up for secondary offices in the Middle East, India, Japan, South Korea, Denmark and Switzerland.
Savills anticipates that investors will continue to embrace ‘beds and sheds,’ given they are supported by ongoing structural demographic and technological trends, and geoeconomic fragmentation. Industrial and logistics has also been highlighted by many markets as a top 2025 pick for investors with core strategies, with the various living sectors also prominent choices in more mature, liquid markets.
According to Savills, improved retail performance is probable in 2025, with buoyed consumer confidence and an uptick of retail sales volumes forecast. Over two-thirds of Savills researchers anticipate rental growth and increases in retail take-up, although it says investors are likely to continue to be selective when deploying into what is a relatively diverse and fast-changing sector, which often favours those with a higher risk-return profile.
Geographical split
In terms of geographies, Savills says it is expecting a stronger recovery in capital markets activity in advanced economies that have seen more resilience in take-up and rents, which should be further supported by interest rate shifts next year.
By contrast, in markets such as India, the occupational backdrop remains a key driver of attracting investors both willing and able to enter these relatively immature but fast-growing markets, underpinned by strong economic growth and significant catch-up potential. Savills positive outlook is not ubiquitous across all markets: in Hong Kong and mainland China, structural challenges to growth and oversupply concerns are likely to continue to weigh on both occupational and investment activity in 2025.
Paul Tostevin, head of Savills World Research, comments: ‘After a chastening few years, the tide is turning. The cyclical factors weighing on property values and investment activity are beginning to recede, and the nascent recovery in real estate capital markets should gather momentum in 2025.
‘According to our experts in 33 countries, however, economic performance will remain top of mind across all property sub-sectors and regions in 2025, followed by demographic forces, given they have such an impact on how people live and work and ultimately drive real estate requirements. Environmental factors are the next most important theme for next year, given the pressing need to decarbonise real estate continues, and the increasingly visible impact of climate change during 2024.’
