Foreign investments in UK property market rises

Foreign purchases of UK commercial property amounted to £8.1bn in the first half of 2012, up 80 per cent on the same period last year, according to a new report.

The proportion of total UK commercial property investment coming from overseas rose to 53 per cent, as a result, the highest level on record, property company DTZ said.

It has been driven primarily by an increased appetite for larger lot sizes in central London, the report added. Foreign investments amounted to £2.5bn outside the capital in the first half, up 31 per cent on 2011.

"Since 2001, when a fifth of commercial property purchases in the UK were by foreign investors, the trend has been steadily upwards," said Ben Burston, head of UK research at DTZ.
"Now, for the first time over a six month period, overseas investors account for the majority of investment activity in the UK.

"We are also seeing foreign investors increasingly attracted to major regional cities in search of yield. However, they are only being tempted beyond the sanctuary of the M25 when security of income is protected by good quality stock, low vacancy rates and institutional leases to secure covenants."

In DTZ's list of the top ten towns and cities attracting foreign investment, Birmingham and Bristol, which ranked third and fourth in the first half of 2011, do not figure, while Farnborough and Rugeley are new entries.

Central London, multi-region portfolios and Greater London aside, Cambridge sits fourth after BioMed Realty Trust's £126.75m acquisition of Granta Park.

During the first half of 2012, overseas interest in the regions came primarily from the US, where investors accounted for 40 per cent of total overseas purchases outside central London.
The figure was heavily influenced by two large multi-region portfolio deals. These were Digital Realty Trust's £716m acquisition of the Sentrum data centre portfolio and Segro's £204.5m sale of industrial estates in Birmingham, Manchester and Rochdale to Harbert Management Corporation (Europe) LLC.

European investors accounted for 21 per cent of investment outside the capital, with Middle Eastern accounting for 9 per cent.

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