Taylor Scott International News
Last year saw record foreign investment in UK commercial property but a sharp slowdown in the second half of the year will make 2016 more of a challenge, a new analysis suggests. Some £67.5 billion was invested in UK commercial real estate in 2015, a 5% decrease on the record of £70.7 billion invested in 2014, making it the second strongest year on record and 46% above the 10 year average, according to the latest research from CoStar Group, a commercial property information provider. Momentum slowed sharply in the second half of the year, with investment down 19% from the previous year. The firm says that this reflects the fact that investment activity has been especially strong over the previous 18 months and good opportunities are harder to find, but also that increasing global economic and political uncertainty is impacting investment decisions. Nevertheless, 2015 was a strong year for the UK's big six regional cities. Office investment increased 16% to £3.2 billion, which is the highest level since the recession and more than double the eight year average. Foreign investors seeking standing assets and development opportunities underpinned much of this investment. Foreign investment into the UK totalled a record £27.8 billion in 2015 a 6% increase on 2014’s £26.2 billion. International capital accounted for 45% of the total volume of transactions, with investment into the UK being spearheaded by the US with a total of £11 billion. But the report shows that investment into UK commercial real estate from the Middle East dropped dramatically by 62% to £1.6 billion, the lowest level since 2012, and it says that this is largely attributed to the collapse in oil prices and the political uncertainty in the region. In contrast, Far Eastern investment increased by 62% in 2015 to £6.4 billion as investors from Singapore and Hong Kong in particular flocked to the relative safe haven of the UK. ‘Despite it being a record year for international capital investing in UK commercial property, we have started to see signs that the market is slowing down. Total investment in the second half of 2015 was down 19% compared to the second half of 2014,’ said Richard Yorke, director of market analytics at CoStar. ‘With 2016 beginning with severe stock market volatility, heightened worries about China’s economy, falling oil and other commodity prices, and uncertainty about the UK’s place in the European Union, total investment may continue to ebb,’ he added. The report also show that demand for alternative assets such as hotels and students accommodation rose strongly in 2015. A sum of £5.5 billion was spent on hotels in 2015, a 47% increase on 2014 making it the strongest year ever. In addition, £4.3 billion was invested in student accommodation, more than double the level invested in 2014 and the strongest year on record. In terms of sector, offices dominated with £29.5 billion spent… Taylor Scott International
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