US investors have been getting more and more interested in foreign commercial property, particularly in the UK.
According to a new report by Lipper, US investors have placed $2.6 billion (£1.68 billion) in office blocks, hotels and various commercial properties abroad in the first three months of 2013. This figure is the highest inflow that has been seen since the first quarter in 2007, standing at $5.3 billion (£3.42 billion).
Industrial analysts have suggested that high returns and large stock supplies have encouraged more investors in the US to look to Europe. Furthermore, it seems that foreign REITs which own good property across the world are much cheaper than those in the US. An example of this is the 83 REITs which Green Street Advisors track in the US trading at 14 per cent, compared to the UK level of seven per cent.
More Americans seemingly want to own properties directly, with $38.71 billion (£25 billion) being put into commercial properties abroad in 2012, a rise of nearly $6 billion (£3.87 billion) from the previous year. Timothy Walsh, chief investment officer for New Jersey's public pension funds, said: "The big plus is diversification of your portfolio, number one. Number two, we actually think there's better returns going forward.”
This comes in conjunction with recent news that more investors are generally turning towards the commercial sector. Even thoughthe market has had a turbulent history recently with prices falling dramatically since the global crisis hit in 2007, experts have suggested that the market is set to turn around for investors in 2013, signposting to average yields of up to 6.5 per cent. Philip Nell, manager of the Aviva Investors Property Trust, said: “We have virtually doubled our market return forecast for UK commercial property for 2013.”