Overseas Owners Increase Stake as UK Commercial Real Estate Declines to £949 Billion
Introduction
The UK commercial real estate market changes fast. Its total value drops even as foreign owners grow in number. The Investment Property Forum report shows UK commercial property now values at £949 billion. This is lower than before. The report also shows that non-UK investors now hold a larger share of the market. In this article, we look at the report’s findings, the change in ownership, and what this means for those who want to invest in property, including Houses in Multiple Occupation (HMOs).
Current Market Summary
At the end of 2023, UK real estate totals an impressive £9.3 trillion. Yet the commercial branch has lost ground over the past three years. The Investment Property Forum report shows a drop from £1.114 trillion in 2020 to a current value of £949 billion. Rising yields and higher interest rates began to matter after an early 2021 peak.
The report splits the commercial property value at the end of 2023 as follows:
- Retail: £275 billion
- Office: £221 billion
- Industrial: £366 billion
- Other types: £88 billion
The industrial sector shows strength, with values rising even as the overall commercial sector falls.
Increased Presence of Overseas Investors
The report marks a strong move by foreign investors. In 2003, foreign owners held 14% of UK commercial property. That share grows to about 40% in 2023. Foreign investment funds and state funds now add more to the UK market. Once, these investors focused on London offices from 2013 to 2020. Now they choose a wider range of sectors and regions. They also buy residential, industrial, and student housing properties.
Breakdown of Overseas Investments
The Investment Property Forum estimates that foreign funds now hold more than £80 billion in UK property. Of that, £16 billion is in residential property and £64 billion is in commercial property. Six main state funds hold over £31 billion in UK real estate. This value does not count other indirect property investments made through infrastructure companies.
Decline of UK Ownership
The report also shows that UK firms hold less of the market now. UK insurance companies and their linked funds dropped from a 20% market share in 2003 to 6% by the end of 2023. They still remain important, though, as lenders in real estate. They are involved in more than £140 billion of loans and securities.
Direct investment by defined benefit pension funds also falls. Their investment drops from £43 billion to £32 billion in the last three years. The funds seem to favor indirect methods now. Even so, UK pension funds still help finance over £100 billion in real estate.
Opportunities in Residential Investment
The report shows a clear rise in institutional money for housing. The residential investment market grows past £100 billion. This growth shows the constant need for housing. It also gives new paths to those who invest in homes, especially in the rising build-to-rent market. Today, there are more than 100,000 build-to-rent homes and strong investments in student housing. The mix of property types is now more varied.
Conclusion
The Investment Property Forum report shows a shifting scene in the UK property market. The commercial sector’s decline meets a stronger presence of foreign investors. Industrial and residential areas do well. Those wishing to invest in property—especially in HMOs or housing—can learn from these changes. Review the full report from the Investment Property Forum and the CoStar Group for more details and numbers.
