Authors: Sophie Henwood and Neil Biswas, Real Estate Partners at Boodle Hatfield
Why is the UK still a magnet for global capital, even as markets shift?
This is the first in a series of articles examining some of the common real estate asset classes that are often the subject of investment in the UK. It provides an overview of the market and key issues to consider. It applies to England and Wales and although Scotland is similar, there are significant differences that the TAG alliance representatives in Scotland can comment upon.
The UK remains one of the most attractive places for foreign direct investment consistently ranking amongst the top in Europe, currently second behind France. The United States (US) is the single biggest investor, deploying over £13bn in 2024 into UK real estate and dwarfing the second placed, £1.5bn invested by Singapore-based investors (these figures are taken from the joint publication issued earlier this year by the British Property Federation, the voice of the property sector, and CoStar, the global leader in commercial real estate information). While overall volumes have decreased slightly in 2024, this mirrors trends across Europe. Assuming a positive trading and political relationship between the UK and its Global trading partners remains, investment levels are expected to increase in 2025 and beyond.
The UK continues to offer a compelling environment for real estate investment, underpinned by political stability, a trusted legal system, and a well-established financial infrastructure. Investors benefit from dependable contract enforcement and a transparent regulatory framework. The economic climate is improving, with inflation easing and interest rates trending downward, creating more favourable conditions for capital deployment. Sterling remains a resilient currency, and non-resident investors have access to competitive financing through a mature and globally connected banking sector. Property ownership in England is supported by well-defined legal rights, and values tend to show consistent long-term growth, reinforcing the UK’s reputation as a secure and stable market.
Another compelling reason to invest in England is the opportunity to acquire heritage and historical assets, allowing foreign investors to own a slice of British history. Separately, areas undergoing urban regeneration, particularly in cities outside London, present strong prospects for capital appreciation, driven by infrastructure upgrades, housing demand, and public-private investment initiatives.
Foreign investors generally enjoy the same rights as UK investors, creating an even playing field. Non-sanctioned foreign investors are allowed to own 100% of a UK company, although some restrictions apply. For example, the National Security and Investment Act 2021, intended to protect national security, requires acquisitions of share capital beyond a certain threshold and in an entity active in a sensitive sector (e.g. defence), to obtain government clearance. Foreign entities are generally free to directly invest and own UK real estate (whether as corporates, limited partnerships, or other legal structures) subject to registration requirements. Notably, the Economic Crime (Transparency and Enforcement) Act 2022 requires disclosure of the ultimate beneficial ownership of the investment entity, a measure that enhances transparency, reduces disputes, and mitigates fraud risk.
Whilst London remains a draw for global capital, the UK’s regions are catching up as investors target other sectors. The so called, "beds, sheds and meds" sectors attract strong investment, each with sector specific issues to consider.
- The "beds" sector, also known as the "living sector", has been particularly active, reflecting the Government's aim of increasing the UK housing stock by 1.5 million homes over the next 5 years (see Government Policy: Plan for Change). High rental demand, particularly in university towns and cities with strong international student markets, continues to drive investment. There is also growing interest in senior living, where the UK lags behind countries like Australia and the US in provision, presenting a significant opportunity for new entrants and expansion.
- The reference to "sheds", an informal reference to the wider industrial and logistics asset class, is a growth sector also strongly supported by Government (see the Industrial Growth Strategy, June 2025) and by the investment market. This sector accounted for 24% of all overseas investment into the UK real estate from 2021 to 2024.
- The "meds" sector encompasses medical real estate infrastructure and is linked to the life sciences and senior living sectors. With the UK's population nearing 70 million, the second most populous country in Western Europe, and both ageing and growing (see National population projections), demand for healthcare-related real estate is self-evident
Regardless of the source of the international capital, careful consideration needs to be given to the choice of investment vehicle, tax analysis, applicable restrictions, asset class, funding options and the possibility of proceeding in a joint venture or in collaboration with other investors. Investors must also plan for transacting, managing, and maintaining income generation capacity and ultimately, exit strategies. There is no "one size fits all" approach which naturally leads to the importance of appointing the right team of advisors; ideally those who are experienced, sector-savvy, and capable of working across disciplines and jurisdictions.
In the next articles, we will explore specific issues to consider in the living sector, the industrial sector, and later the retail and office sectors. We have seen trends and challenges in each which we will seek to highlight and outline the acquisition process including the due diligence process and the roles of the various parties involved.
