The real estate sector in the United Kingdom (UK) includes buying and selling own real estate, renting and operating own or leased real estate, as well as performing real estate activities on a fee or contract basis. In terms of subsectors, real estate is commonly divided into residential and commercial. Real estate is a major part of the UK economy – in 2019, it employed 514 thousand people.
The UK is the biggest commercial real estate market in Europe, followed by Germany and France. Commercial real estate can encompass multiple property types with a focus on financial return and renting, such as industrial office, retail, leisure, medical, hotel, and in some cases even the privately rented residential subsector. In the UK, commercial property investments have increased since 2016, reaching 512 billion British pounds in 2018.
This dynamic of the market is impacted by multiple factors: the economic climate, as well as fluctuation in the supply and demand for properties, can lead to an increase or decrease in stock availability, take-up, vacancy, rent costs, and yield.
Furthermore, the way we live, work and consume inevitably impacts our built environment. With the growth of the online retail sector, storage facilities are under pressure to accommodate much more dynamic logistic processes that ensure we receive our orders within days of the purchase. The continuing concentration of business activities and employment opportunities in big cities have made office spaces integral to their fabric. Unsurprisingly, London is the biggest office real estate market in the UK, with a total of over 270 million square feet of office stock as of the third quarter of 2019.
These processes also affect the residential sector, increasing demand, and subsequently house prices around bigger cities, and thus, causing concerns about affordable housing.
The average house prices in London at 479 thousand British pounds were nearly twice as high as in South West England. Most households in the UK own their homes and rely on a mortgage for home financing. Comparing homeownership rates in different European countries, it can be seen that the UK ranks close to the Netherlands, Sweden, and Denmark, with 65.1 per cent.