As one of Europe’s most stable economies, Britain has attracted a great deal of investment attention in the past few years. This has seen the number of commercial properties owned by overseas investors rise sharply, with this group now holding around 25 per cent of income producing commercial assets in the country.
According to research conducted by the Property Industry Alliance buyers from abroad have more than doubled their British commercial property holdings in the past decade to the end of 2013.
Twenty four per cent of hotels, office buildings, shopping centres and warehouses have a landlord based overseas, with the result that overseas investors are now the largest group of owners of UK commercial property.
In fact, the decade from 2003 to 2013 saw foreign held commercial property rise by an astronomical 129 per cent to £94 billion pounds worth, with around three quarters of these assets based in London.
Although the end of recession has in part been responsible for the recent boom, investors retained a degree of interest even during the downturn, which the Property Industry Alliance believes is down to Britain’s infrastructure, political stability and legal system.
Chief executive of the British Property Federation, Liz Peace, believes these three aspects must be maintained in order to continue to drive investor interest.
She says; “With the political uncertainty caused by an upcoming General Election and a possible European Union referendum, it is important that politicians of all parties avoid measures that could dent investor confidence.
“Sudden or unexpected changes to our taxation system could make the UK lose its competitive edge.”
Although overseas investment into commercial property has spiked in recent years, the opposite can be said for the second largest group of landlords which is comprised of UK insurers and pension funds. This group currently holds around 19 per cent of the country’s commercial property assets – a drop of 16 per cent to £75 billion, during the decade in question.
The question, then, is why UK-based investors which once had such dominance over the domestic market have stepped back to make way for overseas investors? In part, it could be due to the lasting effects of the recession, which shook business confidence caused many to sell rather than buy.
Alternatively, UK based investors may still be investing in commercial property but not yet making an income from their assets. At the end of 2013, commercial property value in Britain stood at £683 billion, yet only £385 billion worth of the assets were managing to produce income.
With overseas investors increasingly seeking to acquire some of the UK’s most profitable commercial assets, there is an increasing risk that domestic investors may be priced out of the market in the coming years.
However, with the focus of investors only just beginning to broaden to areas outside of London and the South East, many opportunities still exist for UK based firms to snap up assets in regional areas.
