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Ben Parkinson
Ben Parkinson
  • 1 Minute Read
  • 01st November 2012

Foreign investment in UK property rises 80%

AQUISITIONS of commercial property in the UK topped £8.1bn in the first six months of 2012, according to a recent report from property advisers DTZ.

The figure amounts to an 80% increase on the equivalent figure for H1 in 2011, with overseas investment now accounting for 53% of the UKs total commercial property market – the highest on record.

The rise has been driven primarily by interest in larger central London properties, with landmark deals such as PNB’s £500 million acquisition of both 90 High Holborn and 1 Exchange Square, as well as Brookfield’s £518 million acquisition of part of Hammerson’s London office portfolio, being finalised in the first six months of 2012.

Outside the capital, foreign investment has risen 31% to £2.5bn, accounting for a total share of 38% of purchases across both quarters.

Ben Burston, head of UK research at DTZ, said: “Since 2001, when a fifth of commercial property purchases in the UK were by foreign investors, the trend has been steadily upwards. Now, for the first time over a six-month period, overseas investors account for the majority of investment activity in the UK.

"Central London deserves its reputation as a magnet for foreign investment and the flow of money from overseas into commercial property in the capital has increased strongly during 2012."

"Central London deserves its reputation as a magnet for foreign investment and the flow of money from overseas into commercial property in the capital has increased strongly during 2012."

“We are also seeing foreign investors increasingly attracted to major regional cities in search of yield. However, they are only being tempted beyond the sanctuary of the M25 when security of income is protected by good quality stock, low vacancy rates and institutional leases to secure covenants.”

Birmingham and Bristol, who ranked third and fourth for the same period in 2011, have dropped out of DTZ’s list of top 10 list of centres for foreign investment, to be replaced by surprise entries Farnborough and Rugeley. Cambridge rose to fourth in this year’s rankings following the acquisition of Granta Park by BioMed Realty Trust for £126.75m.

40% of overseas investment in regional centres during the first half of 2012 came from North America, driven by marquee acquisitions such as Digital Realty Trust’s £716m purchase of the Sentrum data centre portfolio and Harbert Management Corporation’s £204.5m deal with SEGRO to take over industrial estates in Birmingham, Manchester and Rochdale.

European investments accounted for 21% of investments in regional centres, with the Middle East trailing on 9%.