Overseas Investors Drive UK Commercial Property Market Up

According to the results of the research published by CB Richard Ellis on November 26th, the revival of London commercial property market is mainly due to activity of foreign investors.
The research stated that, although the recovery of London commercial property sector, in terms of higher yields and investment volumes, started in the beginning of 2009, those were primarily overseas property investors who accounted for the most part of property transactions. According to CBRE estimates, foreign investors accounted for approximately 80% of transactions on the commercial property market in the UK in 2009.
As such, the two greatest deals of 2009 – the sale of British Land’s Broadgate to Blackstone (American-based equity group) and the sale of HSBC’s Docklands headquarters to South Korea-based state pension fund, which generated £1.1 billion and £772 million accordingly – were agreed with overseas property investors.
Commenting on the situation seen on London commercial property market, Mr. Kevin McCauley, CBRE’s head of research in London, said that increased interest of foreign investors in London property can be explained by several factors, which include a sharp fall in commercial property values, weakened sterling, and less debt constraining overseas investors.
CBRE research showed that property investors were most active in the 3rd quarter of this year, and brought total investment for 2009 to £6.2 billion, with £2.7 billion accounting for the 3rd quarter alone. Of total investment for 2009, £4.9 billion were contributed by overseas property investors.
Earlier in November, the Association of Real Estate Funds research showed that cash flows into UK property funds amounted to more than £700 million; the data presented by the Investment Property Databank also showed that UK commercial property values have been rising for 3 consecutive months.