Property Archive: UK Property Investment Bulletin Q3 2012

Despite the global uncertainty, UK investment has been consistent so far in 2012

Q3 2012 activity of £8.51bn saw a slight decrease of minus 5% from Q2 2012 of £8.96bn. However, it was an increase of 18.8% from the same time last year (Q3 2011 £7.16bn). Overseas investors continued to have the largest share of investment at 47.4% (£4.03bn) in Q3 2012 which has been the trend since Q4 2011. Of the overseas investors, the Far East were the largest at £1.05bn, followed by the Scandinavians at £0.93bn.

On the sell side for Q3 2012, overseas investors again had the largest share at 31.3% (£2.66bn), followed by UK institutions at 21.9% (£1.86bn). The main overseas sellers continued to be the Irish at 27.8%. Overseas investors were the only net investors for Q3 2012 (£1.37bn), making it 15 consecutive quarters of net investment in UK property (since Q1 2009). UK institutions were net disinvestors (minus £0.08bn), for the second consecutive quarter (total minus £0.68bn).

Offices continued to be the most popular sector to buy at 30.4% (£2.59bn) in Q3 2012, followed by shopping centres at 17.5% (£1.49bn). Central London remained the dominant location at 40.8% (£3.47bn), followed by UK wide at 18.1% (£1.54bn).

Total UK property investment volume for 2012 to date was £25.34bn, an increase of 1.2% for the same period in 2011. Overseas investors had a 49.5% share (£12.55bn), followed by UK institutions at 20.6% (£5.21bn). The overseas investors were the only net investors at £6.0bn. The largest net disinvestors were UK listed property companies at minus £2.86bn, followed by owner occupiers at minus £1.41bn.

The average lot size in Q3 2012 was £33.0m, an increase from the average lot size of £29.8m in Q2 2012 and above the average lot size of £24.6m (period Q107 - Q3 12).

Average initial yields for Q3 2012 continued to move outwards but at a less dramatic pace than seen in the previous quarter from 7.29% in Q2 2012 to 7.45% as shown in the graph below. Initial yields for all the main sectors remained on the outward trend. Retail warehouses saw the smallest upward movement of 4 bps to 7.48%. The largest increase was 30bps in the retail sector from 6.7% to 7.0%.