UK Cities Recovering as Attractive Property Investment Targets
The Europe Capital Trends (ECT) report published this week by Real Capital Analytics (RCA) suggests that the UK commercial real estate market recovered strongly throughout 2010, boosted by an influx of foreign investment. London and other UK cities experienced rapid gains in investment activity, eclipsing rival cities on the continent.
“The significance of this report,” says RCA’s UK Managing Director, Richard Yorke, “is that, on a transaction-by-transaction basis, it reveals strong upward momentum in commercial property investment in UK cities.”
The RCA data shows that, despite general economic uncertainty, the UK commercial property market recovered strongly in the first half of 2010. Investment levels reached £13.0bn in the first half of 2010, a 30 per cent increase over the same period last year. This makes UK the largest market for commercial property in Europe, accounting for 31 per cent of all European transactions.
As expected, London led the growth in activity, with investment levels topping £6.3bn in the first half of 2010. With transaction volumes well above its nearest rivals Paris (£3.1bn) and Berlin (£1.6bn), London’s investment activity was driven by the office (£3.4bn) and retail (£1.9bn) sectors.
Manchester was the second most active city in the UK, with total H1 2010 property transactions exceeding £800.0m. This was higher than Munich, Madrid, Rome or Frankfurt. Aerium Finance’s £205m purchase of 3 Hardman Street in Manchester was H1 2010′s 8th largest office deal in Europe.
Other UK cities enjoying rapid 2010 growth in investment activity, included Birmingham, where transactions totaled £413.5m, (on par with Frankfurt), Glasgow where transactions exceeded £350m, Leeds (£271m), Edinburgh (£198m) and Bristol (£110m).
Transaction levels were boosted by foreign investors who accounted for almost half of activity in London, the highest of any major market in Europe. UK property is increasingly seen by foreign investors as a relatively safe haven compared to alternative locations. The appetite for UK commercial property is underpinning values and squeezing yields to amongst the lowest in Europe.
“It will be interesting to see,” says Yorke, “whether Real Capital Analytics’ transactions data will continue to show upward momentum throughout the remainder of 2010. If a gradual recovery takes hold, the attractiveness of UK cities should continue to grow as investment targets.”

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