A recent joint report from CoStar and the British Property Federation demonstrates that the dominance of US capital in the UK’s commercial property investment landscape was one of last year’s key themes.
"Who Invests in UK Property?" found that American investors deployed £13.6 billion in 2024, more than double the amount spent a year earlier and a record 33% share of all investment.
The report can be downloaded here.
US inflows into the UK eclipsed those of all other nationalities combined, and by the greatest extent on record. Nearly half of the 62 deals larger than £100 million completed last year had a US buyer.
Over the past four years, American investors have bought £49.7 billion worth of UK commercial properties, dwarfing acquisitions from elsewhere in the world. The next biggest investors in the period were from Singapore (£12.6 billion), Canada (£6.6 billion), Germany (£3.4 billion) and France (£2.7 billion).
With the exception of France, investment from other countries has generally fallen over the past few years. Inflows from Germany were down 16% from £332 million in 2023 and a fraction of the £2.4 billion spent in 2021 as German investors pivoted back to domestic markets.
Part of the UK’s appeal to US investors, alongside its relatively strong fundamentals and transparent marketplace, is the dollar's strength against the pound. Thanks to the resilience of the US economy and the greenback’s safe-haven status at times of geopolitical turmoil, one US dollar bought £0.80 at the end of 2024. Before the Brexit vote, it was valued at £0.60; before the financial crisis, it was worth £0.50.
The view that the UK repriced quicker than other European markets following the recent interest rate hiking cycle has further boosted its attractiveness.
Many US investors sensed 2024 as the bottom of the market and stepped up spending accordingly. This call is backed up by CoStar’s data that showed yields stabilising or falling in all sectors in the second half of last year.
American private equity buyers have been particularly acquisitive. Four of the five largest transactions in 2024, amounting to £5 billion, involved Blackstone, Starwood Capital, KKR and CD&R-backed Motor Fuel Group.
Hotels and mixed-use portfolios were private equity firms’ primary investment targets last year, while the industrial sector remained popular. Less was spent on office and residential buildings, echoing weak sentiment towards these sectors stateside.
However, several bumper transactions in the London heartlands of Mayfair and St James’s in the final months of the year suggested a growing appetite for prime offices, too, as the opportunity to pick up prestigious buildings at relatively low prices tempted more buyers.
US real estate investment trust Realty Income has also been a significant force in recent years, spending around £5 billion on UK commercial properties since 2021. Unlike the PE players, it has focused heavily on the retail sector, particularly retail parks and supermarkets. It sees an addressable market of $8.5 trillion in developed European countries, with the UK accounting for nearly a third of the total.
Towards the end of 2024, the group bought 3 St James’s Square, a multi-tenant, core-plus office in London’s West End, from a Hong Kong-based investor. Chinese and Hong Kong investors focused on selling last year, a sharp contrast from the record £8.2 billion spent by investors from these jurisdictions in 2017. It bought the building to occupy as its headquarters.
Melanie Leech, chief executive, British Property Federation, said: “It may not be surprising to see that the US tops the list this time for overseas investment given that US investors have been instrumental in the growth of the Build-to-Rent sector, providing more than a hundred thousand modern, professionally-managed homes, but also play an important role in the market for offices, logistics and, increasingly, retail.”