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Foreign investors account for more than 50% of total commercial property purchases in H1 2012 according to DTZ

wantspacegotspace.co.uk - Foreign investors account for more than 50% of total commercial property purchases in H1 2012 according to DTZ

  • Proportion of total investment coming from overseas reaches record level

•    Notable levels of overseas investor activity in Yorkshire and Humberside

UK – Foreign purchases of UK commercial property amounted to £8.1bn in the first half of 2012, up 80% on the equivalent figure for H1 2011, according to a report from DTZ, a UGL company.

As a result, the proportion of total UK commercial property investment coming from overseas rose to 53%, the highest level on record, driven primarily by an increased appetite for larger lot sizes in central London. Notable deals during the first six months of 2012 included Permodalan Nasional Berhad’s (PNB) £500m acquisition of 90 High Holborn and 1 Exchange Square, and Brookfield’s £518m acquisition of part of Hammerson’s London office portfolio.

Increased demand from overseas purchasers is not just restricted to central London. Foreign investments amounted to £2.5bn outside the capital in the first half of the year, up 31% on H1 2011, taking their share of total purchases to 38%.

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.

“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. Pramerica’s £69.6m acquisition of 141 Bothwell Street in Glasgow at 6.17% is a classic example.”

Some unlikely towns feature in DTZ’s list of the top 10 towns and cities attracting foreign investment, with most propelled there as a result of a single, large deal. Birmingham and Bristol, which ranked third and fourth in H1 2011 do not figure in the top 10 for H1 2012, whereas Farnborough and Rugeley are new entries. Central London, multi-region portfolios and Greater London aside, Cambridge sits fourth after BioMed Realty Trust’s £126.75m acquisition of Granta Park.

Ben Burston said: “Outside London, foreign investors go wherever secure returns are on offer which is why the leading towns and cities tend to vary considerably year-to-year. The Granta Park deal in Cambridge is typical – a fully let 100 acre business park bought at 7.9% with an average unexpired lease term of 10 years.”

The markets of Yorkshire and Humberside have also seen notable levels of overseas investor activity in 2012, despite overall transactional volumes remaining relatively low. Some of the most notable deals include Gatehouse Bank’s acquisition of Debenhams, 115-126 Briggate, Credit Suisse’s acquisition of Princes Exchange, both in Leeds, and RREEF’s purchase of Carmel House, Fargate in Sheffield, three deals which cumulatively total in excess of £91m.

James Lawlor, Associate Director in DTZ Leeds’ Investment team said: “Foreign investors have been responsible for some of the region’s largest deals and the equity which has been aimed at Yorkshire and the Humber has remained focussed on the region’s most prime assets. We do not anticipate that this trend will change but it is the lack of investment stock which will curtail transactional volumes, rather than investor demand.”

Posted by The Editor (wantspacegotspace) on 30th October 2012

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