Institutional investment in UK property plummets

Net UK institutional investment in commercial property last year was £400m, down heavily from £2.8bn in 2006, according to figures released today by Capital Economics.   The research firm said following the credit crunch, institutions including UK insurance firms, pension funds and trusts were net sellers of commercial property in the final quarter of 2007, to the tune of £1bn.   “We expect the downturn in capital values to continue, making it likely that institutions will scale back their property investment activities even further in the coming quarters,” said property economist Kelvin Davidson.   “If we are right and a rental value downturn extends the decline in capital values into 2009, there is every chance that institutions (particularly pooled property funds facing higher redemptions from retail investors) will continue to dispose of commercial property at a decent clip throughout 2008.”   According to the figures, the total value of net investments by UK institutions across all asset classes in Q4 was £11bn, down almost 20% from the same time the previous year.   Within that figure, there were net sales of £12bn of equities, the biggest quarterly sell-off in the 20-year history of the data.   nathan.cross@rbi.co.uk