Foreign investors set to become the largest owners of UK property

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.