Commercial Magazine

International Investments: United Kingdom

By Arnie Aurellano

Ask anyone about the United States’ closest allies and global partners and, inevitably, the United Kingdom (officially known as the United Kingdom of Great Britain and Northern Ireland) will be one of the first countries mentioned. And for good reason — the two western powers have held keen diplomatic ties since the Great Rapprochement, an alliance that has now held firm for more than a century.

This close relationship holds true within cross-border real estate investments, just as it does nearly everywhere else. Investors from the U.K. are an active group when it comes to outbound activity, directly purchasing some $13 billion in real estate outside British borders in 2022, according to CBRE. The vast majority (83%) of this capital was deployed in other parts of Europe, but American assets gathered their fair share of British attention as well.

During the year ending in second-quarter 2023, investors with ties to the U.K. poured roughly $1.3 billion into 22 U.S. commercial properties, per MSCI Real Assets. That dollar amount was good for No. 6 among the top countries for acquisition volumes into the U.S. during this period, up three spots compared to their ranking for the 2022 calendar year.

According to MSCI data, the country’s most active U.S. buyer in 2022 was London-based GSA International Ltd., a major worldwide name in student housing. GSA accounted for six of the 25 stateside acquisitions by U.K. investors last year, and it has been assertive in the flourishing U.S. student housing space since its entry into the market in late 2020. The latter half of 2022 continued this pattern, highlighted by the August procurement of the 796-bed Waterloo Tower in Austin and the October purchase of five other premium assets comprising 1,600 beds in Austin; Flagstaff, Arizona; and Charleston, South Carolina.

GSA carried this momentum into 2023, with the company announcing this past January that it had closed more than $550 million in financing facilities across the U.S. through a joint-venture partnership with Morgan Stanley Real Estate Investing. GSA officials touted their ability to secure new lending partners in the current economic climate as a testament to the quality of the company’s track record, the quality of its target assets and the stability of the student housing space. Indeed, having expanded its footprint to more than 18,000 beds across 32 cities in 23 states, GSA seems poised for further growth in a burgeoning sector and appears to be a British-based player to watch.

It’s worth noting that U.K. involvement in U.S. commercial assets has slowed of late. During the four quarters ending this past June, investments from U.K.-based funding sources fell by 39%, MSCI reported. That’s a sizable decrease at face value, but it’s not as brow-raising as one might think.

For one thing, the slowing commercial real estate climate has pushed most cross-border investment into the red across the board. Only three of the top 25 foreign sources of capital grew their U.S. outlays during these four quarters, and the U.K.’s year-over-year decrease in this time frame pales in comparison to that of fellow heavy hitters Germany (-91%) and South Korea (-92%).

Furthermore, British real estate investors appear to be just as motivated as they have been in recent years. According to CBRE’s Investor Intentions Survey released this past March, investors from the U.K. expected to maintain comparable levels of activity this year as in 2022, offering optimism as further data for this year’s transactions becomes available. ●


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