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UK–BASED INVESTOR? WHY LOOK ELSEWHERE? United Kingdom


Central London product remains very keen, with sovereign wealth funds, and especially new institutional entrants such as Asian insurers and pension funds bidding up prices considerably Tony Horrell, Chief Executive Officer || UK and Ireland


2015 GLOBAL INVESTMENT SENTIMENT REPORT


The UK economy has returned to long-term trend growth (3% per annum) after six difficult years; its performance in 2014 places it at the top of the league of advanced economies over the US, Germany and Japan. This has strengthened domestic and international property investor confidence further. Leasing markets are stabilising UK-wide, with many regional markets reporting rental growth. London is seeing extraordinary growth, with City, Mid-Town and West End rents all increasing in a range from 8% to 10% in the last 12 months; little wonder that London is identified as the prime target city for investors worldwide. The global survey response shows London as the single most targeted city.


Given the UK’s strong economic performance and improving property fundamentals, it is little surprise to see that for UK investors, headquartered in the UK, the domestic market is a primary target. The survey results show that the top three cities targeted globally by UK based investors are London (68%), Manchester (28%) and Birmingham (20%). New York was fourth at 13%, just ahead of Edinburgh at 12%.


According to the survey, UK-based investors are driven primarily by property fundamentals, followed by regional economic growth potential. Yield and political/sovereign risk were less important but, interestingly, political/sovereign risk moved up substantially from last year. This is perhaps suggestive of the impact of recent new geopolitical risks, the uncertainty caused by the Scottish referendum, the rise of UKIP, the upcoming 2015 general election and the threat of a Eurozone recession.


The UK’s strong economic performance and heightened expectations of further and substantial improvement in property fundamentals are behind bullish views of investment volume levels. UK-based investors (85%) expect volumes to increase in the UK in 2014, with 35% expecting an increase in excess of 10%. This constitutes a substantial investment gauntlet as £52 billion was transacted last year and a 10% increase would approach the pre- recession transactional peak of £60 billion.


COLLIERS INTERNATIONAL


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