A majority of U.K. institutional real estate investors are considering shifting investments abroad, according to research released Oct. 31 by global risk management and insurance broker Gallagher.
In the August survey of 300 institutional real estate investors from companies with an average annual revenue of £1.1 billion ($1.1 billion), 69% said issues causing that shift include reduced need for office space and high interest rates.
For 44% of them, that disruption has led to pulling investments, while 21% have repurposed developments and 62% have shifted from commercial to residential.
Of the survey respondents, who are responsible for their company's asset management strategy, 86% reported significant disruption in projects within the past five years, and 37% believed the level of risk in investing in the U.K. cities had increased since the pandemic.
The most common disruption cited was supply chain issues (41%), while 19% cited different work patterns in city centers and 29% cited lower demand of city developments. "Given that many investors will become involved at the construction stage, many are having to review their investment and plans for projects even before they have been completed," a release on the research said.
Pandemic-related impacts include hybrid working and pressure on developers to repurpose projects to increase profitability, something that 21% of respondents are doing or considering, particularly from commercial to residential.
On investment returns, 45% did not expect to see hoped-for returns, and 34% expected to have a loss.
For 44% of respondents, U.K. property was no longer profitable enough, and 37% worried about political stability. "Real estate disruption clearly poses a severe threat to the future of investment in U.K. cities, with key institutional investors facing greater risk," said Dominic Lion, director & head of sustainable real estate at Gallagher, in the release.
No target countries were identified by the investors.