Overseas Owners Increase Share in UK Commercial Real Estate Market as Value Declines
The Investment Property Forum (IPF) shows a new path in the UK commercial real estate market. The market now sits at £949 billion by the end of 2023. At the same time, foreign investors now hold 40% of the investment market.
Decline in Commercial Property Value
The IPF report "The Size & Structure of the UK Property Market" tracks trends from 2000 to 2023. The full property market, which includes both homes and commercial places, reaches about £9.3 trillion. The commercial part has lost ground. It grew to a peak of £1.114 trillion in 2020. Then it dropped to £949 billion as high yields and rising interest rates pushed prices down. The report shows the retail part now holds only £275 billion, a 14% rise since 2000. In contrast, the industrial and logistics part grew by 157% in the same time.
Since 2020, the commercial market has changed a lot. The industrial side grows in value despite the overall market staying flat when inflation is taken into account. The UK now has 682 million square metres (about 6,700 million square feet) of commercial space. In that stock, offices count for £221 billion. Other commercial spaces count for £88 billion. This gap shows that the retail area faces more trouble.
Increasing Influence of Overseas Investors
The IPF report shows that foreign investors now control a larger share of UK commercial real estate. Their share jumped from 14% in 2003 to 40% in 2023. Foreign funds, such as private equity real estate funds and state funds, now drive this change.
Before, most foreign money went to London offices. Between 2013 and 2020, 59% of net purchases came from foreign parties. Now, foreign funds focus on homes, student housing, and industrial properties. Major state funds from Norway, Singapore, China, Kuwait, and Qatar hold over £31 billion in UK property.
The Changing Landscape of UK Ownership
UK investors now hold less of the market. UK insurance companies dropped from a 20% share in 2003 to just 6% in 2023. They still work as lenders in real estate despite owning less property. Pension funds that once led direct investments have cut back. Their direct investments fell from £43 billion to £32 billion over the past three years.
UK pension funds now invest more than £100 billion, mostly through indirect channels. The residential market also draws UK funds. Investment in homes now tops £100 billion, or 16% of the total property stock. Growth in build-to-rent units and student housing has helped this rise.
Conclusion
The UK commercial real estate market shows deep change. The overall value falls while foreign investors grow in number. The drop in property value makes the retail area face challenges. But growth in industrial and logistics areas brings choice for those who seek growth. As the market shifts to include more foreign owners, UK investors must adjust to new trends to keep a sound position.
Sources:
- Investment Property Forum (IPF), The Size & Structure of the UK Property Market
- CoStar Group
- Office for National Statistics
- Financial Conduct Authority (FCA)
- IPF Research Programme
Disclaimer: This article has been generated by AI based on the latest news from Google News sources. While we strive for accuracy, we recommend verifying key details from official reports.
