UK institutional investors are moving to indirect real estate vehicles, according to new research by the Investment Property Forum (IPF).
Insurance companies and pension funds have, the IPF found in its latest research project, been reducing directly owned property holdings, with greater indirect investment through unlisted funds.
The Size and Structure of the UK Property Market 2013: A Decade of Change report identified a 29% fall in insurers’ investment, down to £41bn over the 2003 to 2013 period. Investment by collective investment schemes (funds) rose 118% over the same period to £59bn.
Author, Paul Mitchell, of Paul Mitchell Real Estate Consultancy, said the switch to indirect was due to niche needs of institutions being addressed by specialist fund managers, as well as an increase in indirect investment by smaller pension funds looking to boost property exposure.
The report found the value of the UK’s commercial property stock in mid-2013 was £647bn, an increase of 11% on 2003 – the last it was counted. Real estate held as investment totals £364bn, an increase of 27% over the past decade.
The amount of overseas money in UK property has accelerated, up 113% over the period to £88bn. Mitchell said the increase is part of a global trend as overseas funds diversify. UK investors, he noted, have been less inclined to go abroad.
Alan Patterson, AXA REIM global head of real estate research and IPF Project Steering Group chair, said the past 10 years have seen “significant changes in the UK property investment market”, with the rise of the residential sector, a shift from domestic institutional to foreign ownership of central London, and the “declining dominance of retail property”.