Total UK investment volumes reached 48.7bn for 2022

JLL has revealed that investment volumes in the UK for 2022 reached £48.7bn which is 8% below the 10-year average and a 22% decrease on record volumes of 2021. The year had a strong start with a record £16.6bn transacted in Q1 alone. This was followed by a more moderate second quarter at £13.4bn, before volumes dipped again to £11.3bn in Q3 and then £7.1bn in Q4, highlighting the incremental reduction in activity and confidence across the market.

JLL’s research showed that international investment remained at the core of the UK market, with overseas buyers accounting for 52% of volumes for 2022. The UK’s most active international investors in 2022 were from the Asia-Pacific region and the Americas, both accounting for 14% of the £48.7bn transacted.

The office sector represented the largest share of investment activity, making up 35% of the total. This was followed by the living sector which equated to 22% of the total for 2022 and the industrial and logistics sector which also accounted for 22%.

Research highlighted that the Central London market saw £12.8bn of investment and £7.1bn was transacted in Outer London. Within the regions, the South East led in investment volumes, with £4.2bn transacted, followed by the North West in which £2.5bn was invested and the West Midlands where transactions reached £2.1bn.

Cameron Ramsey, EMEA & UK Capital Markets Research & Strategy Director at JLL said, “Whilst 2022 started off strong, the UK faced significant headwinds which caused a downturn in investment. The UK has seen a more significant downturn in comparison to other European markets such as France and Germany. This can largely be attributed to the volatility surrounding the government’s mini-budget and the subsequent fallout during September and October, and it’s timing leading into the crucial fourth quarter of the year. If Q4 volumes in the UK had fallen to a similar degree as those in the other major European markets, investment would have likely been in the £10.5bn to £11.5bn range.  We therefore estimate that the mini-budget arguably cost the UK somewhere in the region of £3.5bn and £4.5bn of commercial property investment during the latter part of 2022.”

“We see two potential scenarios on how this will impact UK investment for 2023. Whilst the material financial market impacts of the mini budget subsided very quickly following the change of Chancellor and then Prime Minister, sentiment remains weakened and the UK’s international reputation potentially damaged. This may result in sustained low investment activity relative to other markets.  Alternatively, the efficient repricing that accompanied the financial market volatility during the second half of last year may mean that investors see value in the UK earlier than other markets, and the recovery may begin sooner, with the UK potentially outperforming its peers as a result.”

Tim Vallance, Head of National Capital Markets at JLL added, “We can expect to see investment activity improve in the second half of 2023, with elevated capital flow from Asia-Pacific buyers, particularly those from Singapore and Hong Kong in comparison to recent years. German buyers will also re-emerge as opportunities arise. The huge, energy-driven flows of capital into Middle Eastern Sovereign Wealth Funds could mean they also become major players as the year progresses.”