UK Real Estate Attracting Strong European Investment

The UK commercial property investment market has been attracting an increasing amount of attention from European investors...

The UK commercial property investment market has been attracting an increasing amount of attention from European investors, with London proving to be the main driver behind the property investment sector in the continent in the third quarter of the year, figures from CBRE show.

In recent research, the organisation revealed that EUR 28.4 billion (GBP 23 billion) was transacted in the sector between July and September this year, up from the EUR 24.7 billion in the previous quarter. The UK's property market accounted for EUR 11.9 billion of this investment volume, up by 40 per cent quarter-on-quarter. London is the main focus for investors, with 73 per cent of all transactions in the UK's real estate investment market conducted in the city.

Jonathan Hull, head of Europe, the Middle East and Africa (EMEA) capital markets at CBRE, commented: "The London market is proving to be highly resilient, and continues to be sought out by investors from around the world. International buyers have been dominant over the last 12 months and it is fair to say that they are making the market for major central London offices." Alex Michelin, co-founder of property design company Finchatton, believes that many investors are using real estate assets in the city as a hedge against the troubles in the eurozone.

Mat Oakley, director of European commercial research at Savills, explained that investors tend to target the capital city of a nation first, before considering their options elsewhere in the country. However, he said that European cross-border investors are more open to putting their money into areas outside London than other groups of financiers. He cited German open-ended funds as an example, pointing out that they have continued to purchase offices outside of the city during the downturn.

"Most international investors would look first at Glasgow, Edinburgh, Manchester and Birmingham," Mr Oakley stated. He added that, in terms of assets, shopping centres are popular in regions outside London. "The shopping centre market is increasingly attracting some non-domestic investor interest around the UK. Then there are some more specialist funds buying in other locations around the UK," he added. A study published recently by Savills noted that many investors are buying shopping centres in the country - and especially London - to avoid exposure to the eurozone, but have access to a strong European market.

Last month, research released by the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) revealed that Italian institutional investors are aiming to boost their property holdings in the coming months. According to the organisation, up to EUR 10.7 billion could be ploughed into non-listed funds by this demographic, although INREV highlighted Italians' preference for assets within their own country. Casper Hesp, director of research and information at the firm, suggested more Italian investors are likely to embrace cross-border investment going forward, because "the non-listed real estate funds sector offers investors the best opportunities for this type of exposure".

Mr Oakley noted that although London is the most buoyant real estate market in the UK at present, there is the potential for this funding to filter down as investors become more confident in the country as a whole. He added that investors who want to grow "look at key regional cities" and expand their activities from there. Stuart Law, chief executive of Assetz, believes the UK's real estate sector will improve over the coming months, because sterling is stable, there is a low level of new supply and "the UK economy is strengthening and will remain relatively strong". Overall, the outlook for the UK property investment market appears to be reasonably bright, with Mr Hull revealing that investment volumes throughout Europe as a whole are expected to be broadly the same in 2012 as those recorded last year.

- Monday 22 October 2012

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