The total value of residential and commercial real estate by the end of 2023 came in at £9.3 trillion, with commercial property falling back in the past three years to just under £1 trillion of that, according to the Investment Property Forum's latest The Size & Structure of the UK Property Market report.

The IPF Research Programme report is authored by Cambridge Real Estate Centre from multiple data sources and was first produced in 2005 and has been updated on a regular basis, with the previous update at the end of 2020.

The report considers two main estimates of real estate: total stock, which includes all property types and owner-occupied real estate, and invested stock, which is owned by institutions and other larger-scale professional investors for investment purposes.

The IPF finds that since 2020 the value of commercial property has slipped from £1.114 trillion to £949 billion. It explains that the value of commercial property increased in 2021 as yields fell and rents edged higher, but then fell because of higher yields, reflecting the impact of higher bond yields and interest rates. Over the 2020-23 period, the value of the UK's commercial property stock has fallen overall but the industrial sector has increased in value.

Looking over the longer term, the value of that total commercial stock is estimated to have increased by 89% since 2000 and 67% over the last 20 years. General price inflation as measured by the consumer price index has been 81% over the 2000-23 period and 73% over the last 20 years. Consequently, the value of the commercial property stock has been broadly flat in real terms.

The IPF estimates that total commercial floorspace in the UK at the end of 2023 stood at 682 million square metres (6,700 million square feet).

IPF said the retail sector is valued at £275 billion, offices at £221 billion, industrial at £366 billion and other commercial real estate at £88 billion. The commercial property total is £949 billion, while residential property is valued at £8.274 trillion, bringing the combined value of residential and commercial real estate to £9.243 trillion.

Over the last 20 years the retail sector has shown by far the weakest growth at 14%. The value of the office stock has increased by 55% and other commercial property (predominantly hotels and leisure) has increased by 103% (3.6% a year), while the industrial/logistics stock has increased by 157%, or 4.8% a year). This compares with a CPI increase of 73% (2.8% a year), indicating that the value of the retail sector has fallen significantly in real terms over this period and the value of the stock of offices has also fallen in real terms while the values of industrial and other commercial properties have increased in real terms.

The report highlights a changing investment structure in the UK institutional real estate market. Overseas investor ownership has increased substantially, a trend that has continued over the last two decades, with overseas investors estimated to account for 14% of the commercial real estate investment market in 2003, increasing to 24% by 2013, and now estimated to account for 40%.

The growth is broadly based, IPF finds, with overseas collective investment vehicles, including private equity real estate funds, overseas REITs, overseas private companies, sovereign wealth funds, and other types of investors all becoming significant investors in UK commercial real estate.

What overseas investors are buying has changed. IPF says London offices were the focus for much of this activity in the 2010s. Between the end of 2013 and the end of 2020, London offices accounted for 59% of the net purchase activity by overseas investors. Over the 2021-2024 period, overseas investment has become more diversified across sectors and the regions, with a sharp increase in investment into residential (including student accommodation) and industrials.

Several of the City of London’s skyscrapers developed over the last 10 years are owned by overseas listed real estate companies, but these companies are also major investors in retail, industrial/logistics, data centres, healthcare and other "alternative" sectors.
Overseas collective investment vehicles (core, value-added and opportunistic funds) are estimated to have over £80 billion in property assets, of which £16 billion is in residential and £64 billion is in commercial property.

Six major sovereign wealth funds – Norges, from Norway, Singapore's GIC, CIC (China), the Abu Dhabi Investment Authority, St Martin’s (Kuwait) and Qatar are estimated to own over £31 billion of UK real estate. This excludes extensive investments in property through infrastructure companies. It also excludes properties owned by members of the government or royal family (directly or through property companies) rather than the country’s main investment authority.

UK insurance companies and their unit-linked funds own less of the market than three years ago, with their share significantly reduced compared with 10-20 years ago. They were estimated to account for 20% of the market in 2003, compared with 6% at the end of 2023. Despite the reduced share of underlying ownership, they remain significant lenders to real estate, with overall commercial real estate exposure, including loans and debt securities, estimated at over £140 billion.

Direct commercial investment by defined benefit pension funds has fallen significantly over the last three years, from £43 billion to £32 billion. This decline has been offset by increases in indirect investment by public sector defined benefit schemes and defined contribution pension funds, IPF finds. UK pension fund investment is predominantly through indirect vehicles, and pension funds continue to play an important role in financing real estate in the UK, with over £100 billion invested in UK real estate. Self-invested personal pensions, which are not included in these figures, also have an estimated £15 billion in property, IPF says.

UK and Channel Island property collective investment vehicles and pooled funds account for £65 billion of commercial real estate, down from £83 billion three years ago, reflecting "value falls, outflows, and fund liquidations". UK REITs and listed real estate companies account for £89 billion of real estate, £78 billion of which is commercial.

Institutional investment in the residential sector continues to increase. Although it remains a small part of the overall rental market, it has grown to over £100 billion. IPF reports that there are now over 100,000 build-to-rent units, as well as substantial investments in the provision of student housing and other forms of residential. Residential investment has increased from 5% of the combined invested residential and commercial stock total to around 16%.

The report uses government and industry data sources. It includes data specially provided by the Office for National Statistics and the Financial Conduct Authority, plus data from CoStar, fund associations like INREV and AREF, brokers and others.

The Investment Property Forum is an individual members' organisation for those operating in the UK commercial real estate investment market with a membership of 1,700, including investment agents, fund managers, bankers, lawyers, researchers, academics and actuaries.