What are the most lucrative opportunities for commercial real estate investors? Here, RealFDI looks at four sectors that offer the greatest potential right now.

The evolving global economy, technological advancements and shifting consumer behaviours have reshaped the commercial real estate sector and brought with them new avenues for investment. Here, we explore the top opportunities in commercial real estate for 2024, offering insights into four areas in particular that promise growth and profitability.

Tech-enabled workspaces

The rise of remote work has transformed the way businesses approach office spaces. In 2024, the demand for tech-enabled workspaces is at the forefront of commercial real estate opportunities.

Companies are seeking flexible, collaborative, and technologically advanced office spaces that cater to the needs of a mobile workforce. Investors can capitalise on this trend by developing or retrofitting commercial properties with smart technologies, co-working amenities, and innovative designs that foster productivity and employee wellbeing.

Technology companies, not surprisingly, are leading the charge towards modern, tech-enabled workspaces. These companies have more flexible policies than in other industries. According to JLL’s Technology Office Spaces report, released in November 2023, more than half of surveyed tech firms have reworked real estate portfolios to optimise for hybrid workplace strategies.

“Organisations focused on creating sustainable and tech-enabled spaces are providing peak experiences for their employees. Though employees might return to denser spaces, there are more amenities, and the spaces are infused with work-enabling technology and designs. Additionally, seamless technology is essential for a hybrid workplace,” the report says.

“Companies looking to attract younger workers will need to invest in workplace technologies and workplace policies that enhance collaboration, flexibility, productivity and communication.”

Sanjay Rishi, JLL

Gen Z, the first generation of digital natives, is having a significant impact on workspace requirements. This 2.5 billion person cohort, born between the mid-1990s and early 2010s, is projected to comprise nearly one-third of the global workforce by 2030. Nearly three-quarters of Gen Z workers want a remote work option, according to JLL’s Global Workforce Preferences Barometer 2022, even when they also want the option of coming to the office.

“Companies looking to attract younger workers will need to invest in workplace technologies and workplace policies that enhance collaboration, flexibility, productivity and communication — and are equal to, or superior to, the technologies that employees use in their personal lives,” writes Sanjay Rishi, who leads JLL’s Americas Work Dynamics business, in an August 2023 article for Work Design Magazine. “Forward-looking organisations are investing significantly in workplace technologies to improve the employee experience.”

Healthcare real estate

The healthcare sector is experiencing a surge in demand for specialised facilities, outpatient clinics, and medical office spaces. Ageing populations and advances in medical technology are contributing to this growth. Healthcare real estate is an asset class that offers investors the potential for stable income and long-term capital appreciation. Assets include medical office buildings, outpatient centres, and facilities that support telemedicine and other healthcare solutions.

A flight to quality will continue to make healthcare assets attractive for investors in 2024 as they cope with the challenges of a high-interest-rate environment, according to CBRE’s UK Real Estate Market Outlook 2024 – a trend that applies to markets worldwide, not just the UK.

“Stronger operational performance, particularly around occupancy and fee rate rises, is creating attractive opportunities for experienced healthcare investors able to price operational risk in a more dynamic market,” CBRE’s report says.

The regulatory landscape in healthcare is evolving, with governments worldwide emphasising the importance of accessible and quality healthcare services. Policies that support the development of healthcare infrastructure and encourage private sector participation are creating an increasingly favourable environment for investors – though navigating the regulatory landscape is crucial and complex.

Investors can enhance the value of healthcare real estate by forming strategic partnerships with healthcare providers. Collaborative ventures with hospitals, medical groups, and other healthcare organisations, for example, can lead to the development of integrated healthcare campuses and medical office complexes.

Such partnerships not only attract healthcare tenants, they also contribute to the overall success and sustainability of healthcare real estate investments.

Meanwhile, technological innovations in the healthcare sector are transforming the way we deliver medical services. The adoption of telemedicine, remote patient monitoring, and other digital health solutions, is creating new opportunities in healthcare real estate.

Assets that support these technological advancements, such as buildings equipped with advanced IT infrastructure, secure data management systems, and telehealth-friendly spaces, are becoming increasingly valuable.

Investors who embrace these changes will be at the forefront of the seismic changes happening in the healthcare industry.

Data centres

The increasing reliance on digital technologies and cloud-based services has propelled the demand for data centres. In 2024, the tech infrastructure boom offers a compelling opportunity for investors to enter the data centre market. With the rise of 5G, Internet of Things (IoT), and artificial intelligence, data centres play a critical role in supporting the digital economy.

Strategic investments in data centre developments or acquisitions can yield substantial returns as businesses seek secure and scalable solutions for their digital operations.

“The increasing adoption of AI and cloud services is making data storage ever more critical, while the proliferation of IoT devices and streaming services is driving demand for edge data centres. Many national governments have backed the development of the sector and encouraged record levels of investment, which is one of the key drivers behind the continued resilience and levels of investment in Europe,” says Julian Cunningham-Day, partner and co-head of Linklaters’ Digital Infrastructure division.

“We are also starting to see a sharp upward trajectory in larger markets as more data centres are built, particularly within North America and Asia,” he adds.

In the US market alone, demand – measured by power consumption to reflect the number of servers a data centre can house – is expected to reach 35GW by 2030, up from 17GW in 2022, according to McKinsey analysis. The US accounts for roughly 40% of the global market. In response to booming demand, global spending on the construction of data centres is forecast to reach $49 billion by 2030, McKinsey estimates.

“The increasing adoption of AI and cloud services is making data storage ever more critical, while the proliferation of IoT devices and streaming services is driving demand for edge data centres.”

Julian Cunningham-Day, Linklaters

Foreign investors had poured an estimated $33.4bn into data processing, hosting and related services globally by September 2023, according to fDi Intelligence, up by roughly 48% on the same period in 2022 and more than double compared with the first seven months of 2020.

The market is top-heavy, however: more than a quarter of foreign data centre investments over the past two decades were by just five companies, including US tech giants Amazon, Alphabet and Microsoft, fDi Intelligence’s data shows.

Among investment destinations, India appears to be leading the race to attract data centres. The country has seen the largest number of FDI projects in cloud and data centre infrastructure since 2019, at 145, according to GlobalData. This is followed by Germany (136), South Africa (126), Australia (81) and Japan (80).

Last-mile logistics and industrial spaces

E-commerce continues to boom, driving heightened demand for last-mile logistics and industrial spaces. As consumers expect faster delivery times, companies are strategically locating distribution hubs closer to urban centres. Investing in well-located industrial properties that facilitate efficient logistics and e-commerce operations therefore presents a significant opportunity. Adaptive reuse of existing spaces or developing new logistics hubs can capitalise on the growing need for streamlined supply chain solutions.

The integration of technology in logistics is transforming the efficiency and accuracy of last-mile delivery. Automation, robotics, and advanced tracking systems are becoming integral components of modern logistics operations.

Investors that embrace these technological advances in their industrial spaces can enhance the overall efficiency of last-mile logistics, reducing operational costs and increasing competitiveness. Smart warehouses and automated fulfilment centres are becoming key differentiators in the industrial real estate market.

Investing in last-mile logistics and industrial spaces provides an excellent diversification opportunity for real estate portfolios. These properties offer consistent demand from a wide range of industries, including e-commerce, retail, manufacturing, and third-party logistics providers. The diversification potential shields investors from the volatility associated with other real estate sectors, providing a stable income stream and potential for capital appreciation.

Sustainability is a growing concern in the logistics and industrial sector. Investors that focus on developing or retrofitting industrial spaces with environmentally friendly practices can thus tap into the increasing demand for sustainable logistics solutions.

Incorporating energy-efficient designs, utilising renewable energy sources, and adopting eco-friendly construction materials align with the global push for environmentally responsible business practices.