US investment in UK commercial real estate hit a record high in 2021.
Buyers from the US struck £15bn in deals for UK real estate last year, according to BNP Paribas Real Estate, up by more than two-thirds on the 2020 total.
Larry Young, head of BNP PRE’s international investment group, said: “The UK market was impacted by both Covid and Brexit and is now seen in many ways as offering better value than continental Europe. The large US investors were traditionally value-add investors in the UK and Europe, but have in the past two years raised core funds.”
BNP PRE said the US share of the UK investment market had risen as the percentage of Asian investors dropped due to travel restrictions.
Industrial attracted half of the total, with alternatives at 29%, offices at 15% and retail at 6%. Blackstone accounted for roughly £6.5bn, followed by Realty Income Group and Lone Star at £1bn each.
Hugh White, BNP PRE’s head of national capital markets, said: “I expect US capital into UK and Europe will be higher again this year, led by the Federal Reserve Board’s QE and the growth prospects for Western Europe. As a market we are in both a cyclical and structural cycle. If you understand how the more valuable uses are evolving, there remain many opportunities to capitalise on. However, be aware of investment themes which are now being driven by weight of money rather than fundamentals alone.”
White said value-add offices around the UK are likely to be the focus this year.
“A focus on the growth employment sectors and where they wish to be located is vital to this asset class,” he added. “The UK’s centres of excellence have already benefited from substantial rental growth in the past 12 months. However, the overarching consideration for all real estate investment decisions needs to be understanding a building’s reason to be and ensuring it is fit for purpose whatever the sector.”
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