UK Commercial Real Estate Value Declines as Overseas Ownership Increases
Investment Property Forum Reports a Shift in the Real Estate Landscape
The Investment Property Forum report shows that UK commercial real estate is losing value. Its total worth falls to £949 billion at the end of 2023. Overseas buyers now own more properties. This change affects those who want to invest, including buyers of Houses in Multiple Occupation (HMO).
Commercial Real Estate Market Overview
The report shows that UK commercial real estate was worth £1.114 trillion in 2020. Now it stands at £949 billion. The main points are clear:
- Yields have risen
- Interest rates have increased
- Wider economic issues have affected the market
In 2021, values went up for a short time because yields were low and rents were high. Later, bond yields and interest rates pushed values down. During these three years, the industrial sector did better than retail and office spaces.
Historical Context and Current Valuations
The total UK property is worth about £9.3 trillion. Homes make up £8.274 trillion. Commercial properties total £949 billion. This sum covers several types:
- Retail Sector: £275 billion
- Office Sector: £221 billion
- Industrial Sector: £366 billion
- Other Commercial Real Estate: £88 billion
Over the past twenty years, the retail market grew the least. In contrast, industrial and logistics properties grew by 157%.
Increase in Overseas Investment
Foreign investors now own a larger slice of the market. In 2003, they held 14%. Today, they own nearly 40%. Groups such as private equity funds, real estate trusts, and government wealth funds now invest in many areas. They no longer focus only on London offices. Instead, they buy properties in various sectors and regions. These moves may impact property types like HMOs.
Changing Dynamics of UK Ownership
UK buyers now hold less of the market. In 2003, insurers and their linked funds held about 20%. By 2023, their share fell to 6%. They still lend more than £140 billion. Pension funds with defined benefits cut direct investments from £43 billion to £32 billion in three years. Many large investors now choose indirect paths. Their funds have grown to more than £100 billion.
Opportunities in the Residential Sector
Even as commercial values slip, residential interest grows. Big investors now put over £100 billion into homes. More than 100,000 build-to-rent units have been built. Investment in student housing is also up.
Conclusion
The report marks a key moment in the UK property market. The commercial market loses value while foreign buys rise. Local investors—especially those interested in HMOs—face both risks and rewards. Learning the new shifts in ownership and sector trends will help investors make sound choices.
Sources:
- Investment Property Forum Report
- Cambridge Real Estate Centre
- CoStar Group
- Office for National Statistics
- Financial Conduct Authority
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.
