Overseas Ownership of UK’s Commercial Real Estate Increases Amidst Decline in Value

Overview of the Market Landscape

The latest report from the Investment Property Forum shows that the UK market’s total commercial property value fell to £949 billion at the end of 2023. The report, "The Size & Structure of the UK Property Market," compiled by the Cambridge Real Estate Centre, states that the market value dropped while buyers from other countries gained a larger share. The report tells us that changes in pricing and who owns the market are happening fast in the UK.

Commercial Real Estate Value Trends

The UK property market, which mixes residential and commercial parts, is now valued at £9.3 trillion. In the commercial area, the value dropped from £1.114 trillion to £949 billion since 2020. Rising bond yields and higher interest rates keep pushing rents down and lower property values.
Long-term data shows that the stock of commercial properties grew by 89% since 2000. The rise in general prices, measured by the consumer price index, increased by 81% during the same time.
The report divides the market into parts: retail is valued at £275 billion, offices at £221 billion, and industrial properties at £366 billion.

Rise of Overseas Investors

Overseas buyers now own a large share of UK commercial real estate. In the early 2000s, they held 14% of the market. By 2023, that share grew to about 40%. The type of investments from these buyers now spreads beyond London offices. Once, nearly 59% of purchases from 2013 to 2020 were in London; now, these buyers invest in residential and industrial properties and in areas outside London.
Major international groups from Norway, Singapore, China, the UAE, and Kuwait now hold more than £31 billion in UK real estate. Their growing presence shows that they see the market as full of new chances for investment.

Domestic Investors on the Decline

UK institutional ownership has dropped in recent years. Insurance companies and other local investors now hold only 6% of the market. This is a decrease from 20% in 2003. However, these firms still lend large amounts, with their exposure rising above £140 billion.
Direct investments from defined benefit pension funds have also fallen. Local institutions are now using indirect vehicles and pooled funds more. This change shows a shift in how domestic players work in the UK commercial property market.

Residential Sector Grows Amidst Challenges

While the commercial side faces pressure, the residential area grows stronger. The report shows that investments in residential properties now exceed the £100 billion mark. Investors see promise in the rental market, including build-to-rent homes and student housing.
The residential sector now stands out as a key field for long-term investment in the UK.

Conclusion

In summary, the UK commercial property market sees a reduction in overall value while foreign ownership grows. As local investors pull back from direct buying, buyers from abroad invest across many property types. With the residential part gaining strength, the coming years may shift the control in the UK property market.

For those interested in Houses in Multiple Occupation (HMOs) or broader real estate investment chances, knowing these trends will help guide smart choices.

Sources

• Investment Property Forum, "The Size & Structure of the UK Property Market"
• CoStar News, Various Articles
• Office for National Statistics
• Financial Conduct Authority

For more information, visit Investment Property Forum and CoStar Group.

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.