London - Overseas investment in the UK property market was up some 50% in the first nine months of 1996 over the same period last year, according to a new report from London-based DTZ Debenham Thorpe. Total investment was up to 1.409 [pounds] billion versus 703 [pounds] million for the first nine months of 1995.
"In the first half of this decade overseas investors accounted for around 12.5% of all deals," says Peter Evans, DTZ's research director. "They are clearly an influential force in the market and it is reasonable to assume they will now remain a permanent feature of it. There will, however, be ebbs and flows in their significance as the relative attractiveness of the UK changes against other mature markets."
Most of the money is coming from Germany. In fact, for the past five years the German funds have dominated the inflow of capital for commercial property in the UK. German funds accounted for 721 [pounds] million of the total outside monies invested in the UK in the first nine months of the year, and that exceeds the previous high of 703 [pounds] million in 1993.
"Overseas demand for UK commercial property has been particularly strong this quarter especially from German openended funds which are experiencing very high liquidity with net inflows of 11.3bn DM this year to July compared to 6.3bn DM in the whole of 1995," says John Rigg, DTZ's director of international investment. "The increase in activity levels was helped by returning rental growth and also the availability of large investments such as shopping centers. There are also indications that an increasing proportion of overseas money will be directed outside London and into the regions and into different market sectors such as retail."
Money is also flowing from the United States, Asia and the Middle East.
But really, why all the interest? A liquid market, a high degree of information flow and the bond/equity type nature of the traditional UK lease with its lengthy term and upwards only rent reviews are making a difference. And, more recently, investors have been attracted by the prospects of returning rental growth and relatively attractive yields on UK property.
It's interesting that the UK retail market is piquing so much interest. A notable transaction was the purchase of a shopping center in Ashton-under-Lyne for 35 [pounds] million by Commerz Grundbesitz Investmentgeschaft mbH (CGI), the German open-ended fund. This is the first shopping center investment by a German open-ended fund and indicates a desire to broaden their UK property holdings.
For more information on the UK property market or for a copy of Money into Property 1996, write to DTZ Debenham Thorpe, 44 Brook Street, London, England W1A 4AG, or telephone them at 0171 408 1161.