Property investment influx wanes

The flood of foreign money into the London property market in 1992 and 1993 dried up last year as rising gilt yields shifted investor attention away from bond-type properties to developments and buildings requiring more active management.

Overseas investors, especially from Germany, dominated the UK property market in the period immediately following the withdrawal of sterling from the exchange rate mechanism. They chased relatively high-income yields available from blue-chip tenants tiedinto long leases.

With most good-quality, safe investments snapped up, foreign institutions and individuals bought buildings worth £820m last year, compared with £1.53bn in 1993.

According to Stephen Newbold at Knight Frank & Rutley, the property agent, foreign investors are unlikely to be as active in the next development cycle in London as they were in the late 1980s, because of the heavy losses incurred by many.

The running was partly taken up by UK purchasers, who spent £1.45bn last year, up 21 per cent over 1993. The most active were institutions funding developments and occupiers buying their own buildings.

Figures from Jones Lang Wootton showed unsatisfied occupier demand at more than 1 million square feet, 28 per cent higher than a year earlier.