Increased interest from collective investment schemes that invest in UK commercial property has seen retail investors close the gap on the institutions and overseas investors as the largest owners of UK commercial property in 2012, according to a new report by the Property Industry Alliance.

The report reveals that the UK institutions – insurance companies and pensions funds – and overseas investors share of the £569bn UK commercial property market fell 1 per cent each to 22 per cent each in 2012.

However, collective invest schemes – such as managed funds and property unit trusts – saw their share increase 2 per cent to 20 per cent of the market, up 127% since 2003. Most of the capital invested in UK commercial property is used to provide pensions and savings for UK households.

Sir Robert Finch, Chairman of the Property Industry Alliance, said: “While overseas investors remain on course to become the single largest owners of UK commercial property, the appetite shown by small institutional and retail investors is a real boost to the industry, as well as highlighting a shift in personal savings habits towards unit trusts.”

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 is now comparable to that in towns;
• The commercial property industry has been amongst the worst affected by the recession, shedding 200 thousand jobs since December 2008 and seeing a full percentage point drop in its share of national GDP;
• As a business cost rent remains very low relative to staff costs at 7 per cent and 5 per cent of office and retail space respectively;
• Approximately 15 per cent of the UK’s CO2 emissions are directly and indirectly related to commercial buildings.

ENDS

The Urban Land Institute (ULI) and the Association of British Insurers (ABI) have become members of the Property Industry Alliance (PIA).

The PIA brings together leading bodies involved in commercial property to give the sector a strong voice on a wide range of issues, including ensuring the contribution of property both to the economy and to the personal wealth of British citizens is fully understood. It is also influential in areas such as property debt, REITs, sustainability and occupier satisfaction.

Membership of the PIA includes the Association of British Insurers,  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) and Urban Land Institute.

Sir Robert Finch, Chairman of the PIA, said: “I am delighted that the ULI and ABI  are joining the PIA. Their membership will broaden and  strengthen the PIA, enabling it  to play an even more effective role in co-ordinating the work of the leading property industry bodies.    The ULI will bring an international, multi-disciplinary perspective to the PIA and a keen understanding of urban development issues based on producing over 600 advisory service panel reports for cities over the last thirty years. The ABI will  provide an invaluable link for the PIA with  the insurance sector, one of the biggest sources of investment in the property industry. Membership of the PIA will enable the ABI to feed more effectively into cross-industry initiatives.”

Joe Montgomery, CEO of ULI Europe, said: “ULI is delighted to join the other leading real-estate bodies at the PIA table and we look forward to helping to  widen understanding of the role that  property and development can play in generating prosperous, vibrant and sustainable cities.”

Marc Mogull, chairman of ULI UK, said, “As a global not-for-profit seeking to improve responsible land use and with a track record of providing a neutral forum to improve dialogue between the real estate fraternity and wider stakeholders including Government, ULI is delighted to join the excellent work the PIA is undertaking.”

John Hale, Manager of Investment Affairs at the ABI, said, “Commercial property is an important market for the insurance and risk management services provided by ABI members. But as institutional investors they are themselves both significant owners of commercial property and a provider of finance to the sector. These make a significant contribution to the asset portfolio which underpins the liabilities that the insurance industry assumes on behalf of its customers.”

ENDS

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