Newsroom

Foreign investors set to become the largest owners of UK property

08 August 2012

Foreign investors are on course to overtake UK institutions as the largest owners of commercial property in 2012, according to a new report by the Property Industry Alliance.

 

The report reveals that foreign investors and UK institutions each held 23 per cent of the UK’s £717bn commercial property market in 2011. However, since 2003 foreign investors have seen their proportion of the market increase 106 per cent to £76bn, while over the same period UK institutions saw a drop of four per cent. If, as expected, this trend continues in 2012 foreign investors will become the largest owners of UK property.

 

According to a recent Development Securities report, foreign investors already own more than half of the offices in the City of London. Ownership by collective investment schemes, such as managed funds and property unit trusts, has also grown substantially by 103 per cent to 18 per cent of the market, reflecting increased interest in the asset class from smaller institutional and retail investors.

 

Sir Robert Finch, Chairman of the Property Industry Alliance, said: “This report highlights the rapidly changing nature of commercial property ownership in the UK.  With other recent reports suggesting that over  £50bn of overseas equity has been  targeting UK real estate and  the attraction of London, in particular, as a safe haven in a turbulent world  there can be little doubt that prime  UK property will continue to act as a magnet for overseas investors.”

 

New research for the City of London and the City Property Association shows that overseas demand is expected to continue for at least the next five years.

 

The Property Industry Alliance Data Report also reveals:

 

 

• Having accounted for less than a fifth of retail in 1993, the value of out-of-town retail property has now overtaken that in town centres;
• The average length of lease continues to reduce and in 2011 fell to below five years compared to 8.7 in 1999;
• Rents, other than central London offices, have been on a downward trend since 2008.
  
  

 

ENDs

 

Notes to editors

 

The Property Industry Alliance is formed of eight leading property bodies that tackle major property issues in a more coordinated way while retaining their separate identities and roles. Members include:

 

 

• Association of British Insurers (ABI)
• Association of Real Estate Funds (AREF);
• British Council for Offices (BCO);
• British Council of Shopping Centres (BCSC);
• British Property Federation (BPF);
• Investment Property Forum (IPF);
• Royal Institution of Chartered Surveyors (RICS)
• Urban land Institute (ULI)

 

 

Quotes:

 

Liz Peace, chief executive of the British Property Federation, said: “Overseas investors are neck-and-neck with the UK institutions as the largest single owner of UK property and, as in the equity market, are set to become the largest owners.

 

“The UK remains a highly polarised market but prime property, particularly in London and the South East, continues to act as a magnet for overseas investors in time of uncertainty.

 

“Despite this move, in one way or another, most of the capital invested in UK commercial property is used to provide pensions and savings for UK households.”

 

Simon Rubinsohn, RICS Chief Economist, commented: “With the eurozone crisis and political uncertainty hitting a number of overseas real estate markets, it is not surprising that foreign investors are looking for shelter in the UK commercial market, despite prices remaining fairly flat.

“The market in London has always been attractive to overseas investors, a trend that we believe will continue whilst finance is increasingly difficult to find from willing UK investors.”