Capital into UK property

Investment volumes for 2013 hit a post-crash high

  • The total investment volume in 2013 was £51.52bn, the best since the 2008 UK property crash.
  • Investment in the last quarter was £14.5bn not as high as Q3’s £16.4bn, but the highest Q4 level since the financial crisis.
  • Overseas investors and UK institutions dominated the market, accounting for nearly 75% of investment deals. Overseas buyers bought half of all properties sold last year.

The £51.52bn 2013 commercial property investment volume was the third highest since the data was first compiled, beaten only by 2006’s £61bn total and the £56.5bn figure for 2007 (see chart below).

While Q4 2013’s £14.5bn investment volume was not as high as the £16.4bn figure for Q3, Property Archive included the year’s second biggest deal – the sale of 50% of Broadgate, which closed in December – in the Q3 total.

Overseas investors and UK institutions continued to dominate the UK investment market, as they have since 2009. Overseas buyers accounted for 50% of all purchases, worth £25.6bn, and UK institutions for 23%, valued at £11.8bn.

As has been the trend since 2011, UK institutions and overseas investors were also 2013’s dominant sellers, accounting for 21%, or £10.7bn, and 31%, or £15.8bn, of deals respectively. Among overseas sellers, US and Irish investors accounted for more than half (56%).

In Q4, UK unlisted property companies and UK private investors stepped up their disposals, to 25% and 20% of total sales respectively, as the wider UK property market improved and they saw opportunities to sell as UK institutions became less risk averse.

The Property Archive estimates that 42%, or £21.6bn, of 2013 deals involved offices (see pie chart), with central London still the preferred location. UK brokers say central London investment was the highest since 2007, with Cushman & Wakefield’s £20bn figure above CBRE’s £16bn calculation.

Improvement in wider market sales was reflected in an uptick in regional deals; The Property Archive estimates 42% of deals were outside greater London. This helped push up the average initial yield by 57 basis points, to 7.5%.

Karen Sieracki of Kaspar Associates says: “The search for higher yields became more relevant as 2013 progressed, with central London reaching a 4.7% average initial yield by Q3.” Risky assets are now in fashion, as investors expect to capitalise on increased occupier demand and economic activity.

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