Overseas Ownership on the Rise as UK’s Commercial Real Estate Market Contracts
UK commercial real estate now has a value of £949 billion. This drop makes foreign investors play a bigger role in the market. A recent report by the Investment Property Forum shows these shifts. The report explains changes in UK investment and overall property prices.
Overview of the UK Real Estate Market
By the end of 2023, all UK property added up to about £9.3 trillion. In the same year, business property fell from £1.114 trillion just three years earlier. Rising bond yields and higher interest rates pushed the market down.
The latest IPF report, The Size & Structure of the UK Property Market, uses data from the Cambridge Real Estate Centre and other sources. The report splits property into total stock and invested stock. Total stock covers all types of property, including owner-used. Invested stock means property held for income. In 2023, the commercial floorspace reached about 682 million square metres.
Key Valuations and Observations
The values in the commercial sector break down as follows:
- Retail: £275 billion
- Offices: £221 billion
- Industrial: £366 billion
- Other Commercial Property: £88 billion
The retail sector grew by only 14% over the past twenty years. In contrast, the industrial and logistics area went up by 157% since 2000. ## Shift in Investment Dynamics
Foreign buyers now control a larger part of UK commercial property. In 2003, their share was close to 14%. By 2023, this share rose to around 40%. International investors now spread their money beyond London offices. Between 2013 and 2020, London offices made up 59% of foreign net purchases. Now, the money also goes into residential and industrial property.
Profile of Overseas Investment
The report shows that foreign investment funds hold over £80 billion in property. A large part of this money goes to homes, worth about £16 billion. Major funds from countries like Norway, Singapore, and China have invested more than £31 billion in UK property.
Declining UK Ownership
Local companies lose ground in the property market. UK insurance companies and pension funds once held a strong share. Their share dropped from 20% in 2003 to just 6% today. Direct investments by defined benefit pension funds fell from £43 billion to £32 billion in three years. Still, UK pension funds have more than £100 billion invested in property through different channels.
The Future of Commercial Real Estate in the UK
Changes in the UK property market call for new steps from local investors. The rise in foreign buying shows that outside interest in UK property stays high even as the local market faces challenges.
Summary
UK commercial property now stands at £949 billion. Foreign investment now makes up 40% of the market. While retail and office spaces show weak growth, industrial and residential areas have grown. Local ownership is down, which brings both risks and fresh chances for homegrown players. For those thinking about investing in property, such as House in Multiple Occupation (HMO) setups, these ideas may help in planning smart moves.
Sources
- Investment Property Forum – The Size & Structure of the UK Property Market
- CoStar News
- UK 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.
