Excluding multiregion portfolios, London attracts the lion’s share of cross-border funds flowing into the country, thanks to its scale and liquidity, according to a new report jointly produced by CoStar and the British Property Federation. However, the report "Who invests in UK property?" also found that London’s popularity waned last year as both domestic and overseas investors pivoted away from offices.
The report can be downloaded here.
London investment volumes dropped 45% below the 2021-23 average to £11.4 billion in 2024, with foreign buyers behind 39% of activity. Spending across the UK’s other regions held up better at £17.3 billion, a level 28% below the average of the prior three years.
While the South East remains the preferred region for investment outside London, owing to its dynamic economy and proximity to the capital, changing investor preferences have allowed other regions to catch up.
This can be partly attributed to weak investor appetite for out-of-town office buildings or parks, historically the South East’s most popular asset type, at the expense of other regions’ industrial and living sectors, favoured for their long-term structural tailwinds.
The maturing of the build-to-rent sector and positive sentiment towards student housing are helping to support investment elsewhere in the UK.
Manchester’s thriving build-to-rent market, fuelled by young professionals and families seeking high living standards at lower costs than London, has contributed to the North West’s comparatively strong investment volumes. Together with the West Midlands, the North West has drawn more foreign capital than other regions outside of London and the South East over the past several years, thanks to the appeal of well-connected warehouses and the enduring popularity of Manchester.
In Scotland, transaction activity has held up comparatively well over the past couple of years, despite the Scottish government's rent control policy deterring investment in BTR and the country’s relative lack of logistics assets to satisfy investor appetites.
The turning of the political tide north of the border has reduced the risk of independence, while softer pricing in the office sector has caught the attention of buyers from across Europe, particularly French SCPI funds. Aberdeen notably recorded its strongest year for investment since the oil price crash of 2014 as opportunistic investors snapped up office buildings at double-digit yields.
Falling prices have encouraged investment in retail, too. While supermarkets and retail parks remain popular for their defensive characteristics, sharp price declines have reignited investor demand for shopping centres, with many trading at more than 60% discounts to prior sale prices.
Transaction volumes on prime regional high streets such as Buchanan Street in Glasgow have rebounded as investors eye reversionary opportunities following the pandemic-induced rebasing of rents. London’s Bond Street has seen a flurry of deals with Blackstone’s £227 million acquisition of 130–134 New Bond Street at a 3.5% yield signalling a turning point for values on the country’s most expensive shopping street.
While volumes have been relatively low in some parts of the country, multiregion portfolio transactions may somewhat mask the extent of regional investment.
For example, Project Philadelphia, a sale-and-leaseback portfolio of 25 Asda supermarkets, was purchased by Realty Income for £650 million in the second half of 2024. It included assets in Scotland and Yorkshire. Assura’s acquisition of Northwest Healthcare Properties’ portfolio for £500 million, while weighted towards London, included several properties in the East of England.
Portfolio deals offer diversification and allow purchasers to efficiently deploy significant amounts of capital at a scale that may not otherwise be possible. Indeed, multi-region portfolio transactions are the dominant route for overseas money entering the UK. Around £13 billion was spent on these types of deals in 2024, a rise of 60% year-over-year and on a par with the 2021–23 average. Multi-region portfolios attract a relatively high 70%-plus share of overseas investment.