From inflation and interest rates to economic growth prospects, real estate investors have had plenty of lingering uncertainties to contend with this year.

These challenges have taken longer to ease than many had hoped.

We sat down with David Rea, JLL’s Chief Economist for EMEA, to probe five questions on the key issues facing commercial real estate investors as we head towards the end of the year.

There are some big risks, such as geopolitical risk and election outcomes, climate risk and supply chain disruption. If realized, they could severely alter the outlook, so we need to keep these under review.

Disruption to shipping is something to keep an eye on. That could have implications in the next few months for demand for logistics space, a sector which has attracted significant capital post pandemic. And, of course, there may be an impact on both retail sales and retailer profitability if shipping operators can’t get goods to market on time.

Across most markets, there’s a base case for continued strengthening in economic growth prospects. I think we can say growth will be stronger in 2025 and 2026 than it has been this year and last.

Progress in economic growth rates will help improve sentiment towards the real estate sector. It’s worth remembering that the real estate cycle is lagging the economic one and is only now, in H2, starting to pick up.​

The real estate cycle has turned the corner in the second half of this year, and as we look toward 2025 and beyond, we see continued rental growth – driven by fundamentals and not just inflation-indexing – as well as prospects for yield compression.

We’re forecasting yields will begin to move in across most markets, starting in 2025, which will boost prospective capital growth as well as the appetite from investors to re-enter the sector.

Downward movements in real estate yields are dependent on how far and how quickly markets adjust and adapt.