Overseas money floods into UK commercial property

Citation

(1998), "Overseas money floods into UK commercial property", Property Management, Vol. 16 No. 1. https://doi.org/10.1108/pm.1998.11316aab.012

Overseas money floods into UK commercial property

Overseas money floods into UK commercial property

"Direct overseas investment in UK property accelerated dramatically during the first half of the year reaching 1 = 2. 4 billion. This figure represents a threefold increase on the same period last year and exceeds the amount invested from overseas during the whole of 1996 at £2.16 billion", according to international property advisers DTZ Debenham Thorpe.

So far this year overseas investors have accounted for around 27 per cent of all reported investment transactions in the UK commercial property market of over £l million per deal. This demonstrates the significance of overseas players and their continuing commitment to the UK property market (see Figure 7, Table III).

The traditional institutional lease with its lengthy term and upward only rent reviews, the well established and transparent nature of the UK property market and low entry and exit costs provide an unusually attractive combination for overseas investors. The recent surge in activity has been encouraged by strong economic growth, coupled with prospects for continuing increases in rental and capital values relative to other European countries (see Figure 8, Table IV).

Although there has been growing activity from other overseas investors, notably from the Far East, Middle East and The Netherlands, the domination of German investors continues, accounting for over a quarter of all overseas investment during the first half of 1997. An inflow of DM57 billion over the last six years has provided these funds with considerable liquidity and a need to diversify beyond their national boundaries. Although there is potential for a change in German tax laws that could affect investors, as yet there are no firm plans, and the healthy investor input is expected to continue.

Although London still captures nearly two thirds of overseas investment, a growing awareness of the diversity of regional opportunities, coupled with a growing acceptance of the value added by active management has resulted in an increasing amount of overseas purchasers seeking investments outside the capital.

John Rigg, Director of International Investment, DTZ Debenham Thorpe, comments:

Current evidence suggests that we will see overseas investment in 1997 surpass all previous annual levels. Changes in German tax laws could mean a fall in the amount of money flowing into the German open ended funds, but their very positive experiences of UK property investment should mean this country continues to attract a significant proportion of their investment purchases.