Investment in UK property last year ended on a high
Despite the UK investment market finishing the year nearly three billion pounds below 2010’s overall activity (35.76 billion British Pounds), the strong finish in the last quarter of 2011 demonstrates investors’ continued attraction to the UK commercial property market. The UK’s 2011 total investment turnover is particularly telling when compared to 2008 (24.25 billion British Pounds) and 2009 (25.2 billion British Pounds) figures. Risk aversion and the consequent trend of ‘flight to quality’ have been the main drivers for investors as they attempt to avoid economic uncertainty in the Eurozone, coupled with the attraction of the UK’s long lease structure, security of income and it’s liquid, transparent market.
The flight to quality is particularly relevant to London, which accounts for 8.4 billion British Pounds of the UK’s total for 2011, and continues to be a strong magnet for foreign investors. An emerging and prevalent trend that looks set to continue is the interest from foreign investors in London, notably Asian and North American Sovereign Wealth Funds and pension funds, as they are once again drawn to the prestige and stability that the UK’s capital has to offer.
The uptick in UK commercial property investment was particularly strong in the fourth quarter of 2011 (8.3 billion British Pounds) when compared to the previous quarter (7.7 billion British Pounds), representing an increase of eight per cent. Large deals such as Oxford Properties purchase of Green Park in Reading and Crosstree Real Estates purchase of 1-3 Berkeley Street in London contributed to the strong finish to the year. Overall UK investment in 2011 significantly outperformed other European commercial property markets, with Germany (19.6 billion British Pounds) and France (13 billion British Pounds) the second and third largest markets. The UK accounted for roughly one-third of all investment activity in the EMEA region (99.5 billion British Pounds) in 2011.
Simon Blake, Head of UK Capital Markets, CBRE, commented: “Despite the continuing uncertainty in the Eurozone, the UK commercial property investment market had a healthy 2011 and continues to stand head and shoulders above any other European country in terms of its attraction as an international property investment hot spot. Central London, in particular, remains the most important city in Europe, when it comes to direct real estate investment. Since the ‘credit crunch’ in 2008 cash rich foreign investors from Asia, North America and Middle East have sought quality and stability by setting their sights on the capital in an attempt to diversify their assets. The UK’s attraction for commercial property investment reflects a number of key attributes, including the size, depth and liquidity of its investment market, the transparency it offers and the long lease structures which benefit investors.”