Asians Lead London Commercial Property Splurge

Overseas investors have spent almost £7bn on London property this year, according to broker Knight Frank, with £5.6bn spent in the capital in the first half of the year, led by buyers in Hong Kong.

Some of the biggest deals this year have included the purchase of the ‘Groundscraper’ at 5 Broadgate by CK Asset Holdings for £1bn, as well as Singapore-based Ho Bee Land’s move for Ropemaker Place, at £650m.

Earlier this week, Goldman Sachs sold its Plumtree Court scheme in the City for £1.2bn to South Korea’s National Pension Service.

“London office prime yields can seem good value to overseas investors . . . Particularly given the prospects of some rental growth and the recent movements in sterling,” said William Matthews, head of capital markets research at Knight Frank.

Nick Braybrook of Knight Frank added:

“Despite the political turmoil surrounding the UK with Brexit, London is once again the most liquid real estate market in the world.”

Separate figures from CBRE show “explosive growth” in South Korean investment in London this year, at £2.24bn compared with £311m in the whole of 2017.

Chris Gore, head of City transactions at GVA, largest independent commercial property agency, observed: “Global allocations to property are rising and there is strong competition for assets in safe-haven markets. London remains a very landlord-friendly city, with long occupational leases and upwards-only rent reviews.”

British investment funds are also buying City property

According to figures from Savills, British investment funds are also starting to acquire office buildings in the City of London, after two years of shying away from commercial property in the capital because of uncertainty over Brexit.

Savills said that UK funds have invested £761m so far this year, buying nine buildings. The figure is ahead of the £493m UK funds invested in the City for the whole of 2017.

Richard Bullock, City investment director at Savills, said:

“When the Brexit situation raised its head, there was a lot of nervousness. People expected the occupational market to collapse but it has held up a lot better than anyone was expecting, which has given investors’ confidence that this is not necessarily the end of the world.”

EU buyers are returning to London, too

New figures show European buyers are returning to London’s residential housing market.

The proportion of homes across the capital sold to a buyer from the EU rose to 13% in the first half of this year, up from 10% a year ago, according to Hamptons International.

In the year after the referendum, the proportion of European buyers dropped sharply, particularly in prime central London, from 28% to 8%.

Hamptons said foreign buyers made up 35% of all housing sales in London in the first six months of 2018, up from 33% in the same period last year. Hamptons analyst Aneisha Beveridge that the fall in the pound and easing of Brexit uncertainty have contributed to the boost.

Technology sector propping up UK commercial property

The rise of telecoms, media and technology companies flocking to set up in London has enabled the British commercial property sector to “exceed expectations” since the vote to quit the European Union, according to La Salle Investment, “despite economic fragility and ongoing geopolitical uncertainty.”

Analysis by Savills shows that in the first three months after the Brexit vote, to the second quarter of 2018, technology companies have taken 3.1m sq ft of space in central London, equating to about 12.8% of the total. “For them, it is about London being a place where you can consider multiple locations to be in,” Savills’ Paul Bennett said.

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