Unsurprisingly, the sellers have been banks and private property companies pressured by banks, who for the last three years have been trying to exit their positions. The buyers have been increasingly from overseas although UK institutions and quoted property companies have also been net buyers.
Overseas buyers are presumably bringing some or all of the funds required from overseas. This is especially significant because when you look at the lenders active in the UK market, almost all have a terrible hangover of bad loans. According to a report from De Montfort University in Leicester, over 25% of the total UK commercial loans are at 100% LTV or more and another 35% are at 70% LTV or more. This means that 60% of loans cannot be refinanced at normal lending terms, so banks cannot get the collateral off their balance sheet without taking a bath.
Banks are trying to offload property whenever they can, but have simply had to accept debtors servicing the interest only despite the repayment terms rather than force a situation where a glut of commercial property hits the market and depresses values, which makes the problem worse.
What has been sold in 2011 is largely what buyers want to buy, and the change in that value has been instructive. While central London offices have declined from 32% to 28% of the total, offices elsewhere in the UK have grown from 10 to 17%. Industrial has also grown from 10 to 18%, but in retail excluding shopping centres (+7%), unit shops and supermarkets have dropped 22%, and there is clearly an excess of retail stock on the market.