International investors flock to UK ’ s ‘ Big Six ’ regions
The UK ’ s six major regional cities have seen a spike in international investment activity over the past 12 months .
Outside of an increasingly expensive London , the UK ’ s ‘ Big Six ’ cities - Birmingham , Bristol , Edinburgh , Glasgow , Leeds and Manchester – attracted £ 2.5 billion of international investment in 2016 , a 69 percent increase on 2015 , the highest level of cross-border investment on record , making up more than half ( 54 percent ) of the total investment .
“ It ’ s investors from Europe , particularly Germany , who have been most active in the Big Six in recent years ,” says Ben Burston , Head of UK Capital Markets Research , JLL .
“ They understand the dynamics of the different local markets , and are attracted to the Big Six because they offer the opportunity to acquire quality prime property in the deep and liquid UK market , with attractive yields relative to London and their home markets ”.
Edinburgh took the lion ’ s share of international investment last year , with overseas capital making up three quarters of all investment into the city ’ s commercial real estate sector .
Edinburgh took the lion ’ s share of international investment last year , with overseas capital making up three quarters of all investment into the city ’ s commercial real estate sector .
Manchester followed in second place , with 68 percent of all investment activity involving international investors .
Offices accounted for 44 percent of all transactions , followed by Alternatives at 23 percent .
Changing face of investment
But it ’ s not just capital from the UK ’ s continental European neighbours that has been making waves , as more money from Middle Eastern and Asian investors also flowed into the UK regions in 2016 .
“ The profile of investors targeting the UK regions is changing ,” adds Burston . “ Looking at regional UK investment overall , which includes all investment outside of London , we have seen an enormous jump in capital coming from Asia and the Middle East .”
Investors from Asia Pacific alone increased their allocations to UK regions four-fold in 2016 to £ 2.2 billion . Middle Eastern capital more than doubled to £ 824 million .
Until recently , these investors have focused their attention on London but are now branching out to other UK cities , which offer higher yields and strong corporate leasing activity as many major companies operate outside of the capital .
“ These investors struggle to achieve their desired scale , stability and return aspirations in their domestic markets ,” adds Burston . “ In response to challenges faced at home , and the desire to diversify across the major currencies , they are setting their sights on the UK ’ s regions .”
Looking ahead , the Big Six will be at the forefront of regional investment , he adds .
“ As these cities continue to expand and benefit from commercial development associated with improving infrastructure , investment from Europe , the Asia Pacific region and the Middle East will continue .” theinvestor . jll 33