Cross-border investment in UK commercial property rose by 8% to £6.9 billion in 2003 with Germany claiming top spot for investor activity with purchases totalling £2.9 billion.
According to DTZ Research´s overseas investment in UK commercial property report published this week, despite a weak occupational market, cross-border investment in the UK during 2003 remained buoyant with purchasing activity increasing by almost 8% on 2002 levels. Germany was the largest buyer of commercial property during 2003 representing a 40% share of total overseas investment.
Of the total cross-border European activity by the German open-ended funds in 2003, around a third was channelled into the UK commercial property market. The UK was the favoured location of these funds with France closely behind, which attracted around £2.7 billion of German capital.
US investor activity in the UK fell by around 50% on 2002 levels totalling £0.9 billion, the lowest level recorded by DTZ Research since 1999 - although we would expect this to reverse as most UK occupational markets start to recover.
Middle East and Irish investors have become more important players in the UK property market in the last three years, a trend which continued in 2003 with total purchasing activity reaching £1.5 billion and £1.1 billion respectively.
Investment from the Middle East in particular is expected to continue to grow during 2004, especially from Israel where there is significant potential for growth following the decision by the Israeli Government to relax controls on the cross-border purchasing activity of pension funds and insurance.
Geographically, Central London continued to attract the lion´s share of investor interest with around £3.1 billion of funds directed to this region. However, interestingly as a percentage of total foreign purchases, its share has declined from 55% in 2001 to 45% in 2003.
Offices continue to be the property type of choice accounting for around half of the total purchasing activity in 2003 (£3.8 billion), however, investors´ appetite for retail continued to increase with purchases reaching £2 billion, the highest level ever recorded by DTZ Research.
In terms of sales activity, the total value reached around £5 billion in 2003, a significant decline on 2002 levels, however, overall 2003 saw a return to a long term trend where overseas investors were net investors in UK commercial property.
Nick West, International Investment Director at DTZ, comments: 'With the improved economic outlook for the UK relative to one year ago, investor´s desire for commercial property is expected to remain strong, especially if the occupational markets continue to improve as anticipated. The UK offers high liquidity and a good quality of stock as well as a robust performance relative to the rest of Europe, therefore we believe that the UK will continue to attract significant investment from overseas during 2004.'