Global investors are likely to strengthen their activity in the UK real estate market given a bounceback in commercial, and BTR, yields as well as favourable currency market conditions. The UK property market is generally considered stable and reliable delivering returns and continues to attract foreign direct investors.
The latest build to rent (BTR) report for the first quarter of 2022, by Cushman and Wakefield, revealed stabilised yields from 4 per cent for regional UK cities up to 4.75 per cent for regional co-living spaces. London co-living spaces sat at 4.25 per cent whilst tier 2 regional BTR yields held firm at 4.5 per cent. These are amongst the most attractive in Europe, driving investment into income producing BTR assets.
The commercial property sector similarly has exhibited remarkable stability and resilience with prime City of London office yields now at 3.75 per cent, whilst regional office yields held at 4.75 per cent with prime locations fetching as much as 5.25 per cent. Research from Cluttons for the first quarter of 2022 reveals prime headline rents have been maintained across markets with a focus on quality. Regional office rental growth over the last quarter reached 2.4 per cent for instance.
As such, UK real estate investment levels are forecast to be expansionary for the medium term. Half of portfolio landlords (49 per cent), for instance, were considering purchasing additional BTR and BTL investment properties over the next year according to a recent survey by Handelsbanken.
Whilst rising interest rates may slow domestic investor capital deployment, the stability and wealth preservation qualities of UK property assets offers significant foreign direct investment appeal.
In Bank of London and The Middle East’s (BLME) new report, ‘Built to Last: Why Gulf investment in UK real estate will endure and expand’, experts cite three key reasons for this growth: the UK’s unique cultural characteristics; its regulatory and legal framework; and strong regional growth outside of London.