UK Commercial Property Sucking In Overseas Money

Money from overseas investment is continuing to flood into British commercial property.

Investment was up nearly 50% to £58 billion in the 12 months to the end of June 2014, according to a study by commercial real estate services firm Cushman & Wakefield.

Around 40% of this cash was from overseas as foreign investors were attracted by high yields and steady rental returns, says the report.

One reason why overseas investors are ready to switch their cash into the UK commercial property sector is because the International Monetary Fund (IMF) has marked the nation as the fastest growing developed economy.

Britain also has political stability, steadying employment and one of the world’s leading financial centres.

Blinkered investors

However when investors think Britain they often mean London and are blinkered to opportunities beyond the capital, says the firm.

Only 15% of international investment was seen outside London and the South East during the past five years.

“It’s likely that investment will start to ripple out soon,” said a Cushman & Wakefield spokesman.

“Prices are rising in London, but demand is not abating while yields are shrinking. Buyers are beginning to look at alternative assets away from warehouse, retail and offices.”

The firm gave an example of a Wall Street hedge fund to buy a chain of 27 care homes in Britain earlier in the year.

Alternative assets

“Healthcare, hotels and student accommodation are coming onto the radar as leases are often longer than prime property and give better yields,” said the spokesman.

Part of investor thinking is that Britain’s aging population will provide increasing opportunities in leisure and healthcare as more retired people spend their pension cash on hobbies and pastimes before they reach a stage in life where they need long-term care.

“All this money looking for a home in Britain is a good thing for the market,” said the report. “It reflects on the progress the economy is making.

“Rental income and good capital growth are the two factors enticing foreign investors, particularly in London, where they have already seen massive gains.

“Rental value is likely to become the most important factor in the long-term, and this will be helped by strong demand from companies for space in London and the South-East which is likely to outpace supply.”

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