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United Kingdom
The United-Kingdom is one of the largest
commercial real estate markets globally, and
in terms of invested stock is the largest across
Europe.
The UK attracts investors from across the Globe, with
many overseas investors concentrating their activity
in Central London. Activity across the rest of the UK
is relatively lower and focussed more towards the key
cities and prime shopping centres. Domestic activity
across the UK is strong and typically represents over
half of total activity. However over the last decade
we have consistently seen net sales from domestic
investors.
The UK also has a well established investor base of
its own, with many institutional investors and listed
property companies. Legislation to create REITs came
into effect in 2007. The UK also has a well established
fund management sector for both listed and unlisted
funds, with many funds domiciled offshore in UK or
foreign jurisdictions. The depth and breadth to the
investor base supports strong levels of liquidity.
Given the maturity of the market it is relatively easy
to establish new funds in the UK, subject to meeting
regulatory requirements.
Debt funding is also relatively easy to secure,
especially for core assets. The majority of funding is
provided by both domestic and overseas banks which
are active in the UK market. In recent years there
has been growing activity from institutional lenders
(predominantly insurers) and private and institutional
debt funds.
Market sizing
United Kingdom
Europe
Invested stock
(Total stock)
EUR 613bn
(EUR 982bn)
EUR 3,335bn
(EUR 8,201bn)
Liquidity ratio
(10y average)
11.3%
(7.4%)
5.6%
(4.6%)
2014 volumes
(10y average)
EUR 70bn
(EUR 50bn)
EUR 187bn
(EUR 142bn)
Market pricing – London (Q4 2014)
Office
(City)
Retail
(West End)
Industrial
(Heathrow)
Current Yield
4.25% 3.00%
5.25%
Min/Max (10y)
4.25-7.00% 3.00-5.75% 4.00-7.50%
Yield definition
Net initial yield
Source: DTZ Research
Investment activity by source of capital, 2014
Investment activity by asset type, 2014
Source: DTZ Research
Source: DTZ Research
Domestic
Non-European
European
Office
Mixed Use
Retail
Industrial
Other
51%
39%
10%
44%
23%
5%
11%
7%
124 Investors Guide to Europe 2015