In Q4 2012, the Central London property investment market witnessed the third highest transaction volumes in record, according to new research from global property advisor CBRE. The capital attracted £14 billion worth of investment, as London’s popularity amongst overseas buyers continued, accounting for 67% of turnover in 2012. Over the coming year CBRE expects this interest to remain strong, although a lack of available prime stock may constrain purchases; however pressure on prime yields is expected to continue.
The Central London property investment market grew by 55% in 2012, with activity in the City contribution £7.2 billion to this figure (more than double the £3.5 billion seen in 2011).
Midtown was similarly active, recording its most successful year since 2005 (£1.6 billion), whilst the West End contributed £4.4 billion. The occupational market was more subdued as a result of the Eurozone crisis, with overall take-up for the year finishing at 9.8 million sq ft against a long-term average of 11.8 million.
However, a projected increase in consumer and business confidence in the second half of 2013 should filter through to the occupier markets and relieve some of the pent-up demand. This growth should also be reflected in a recovery in take-up, and renewed rental growth. A number of high profile lettings in the City sub-market resulted in a quarter-on-quarter rise of 89% in the final months of 2012.
Simon Barrowcliff, Executive Director, Central London Capital Markets said: “2012 saw the continued trend of high levels of overseas capital entering the Central London market, and in particular that of new foreign buyers, accounting for 20% of total volumes last year. Activity in late 2012 and early 2013 points to a continuation of this theme, and it is likely that overseas investors will continue the more recent trend of taking higher levels of risk. Furthermore, the lack of available investment stock in the prime sector is likely to maintain premium pricing.”
Michael Edwards, Executive Director, Central London Capital Markets said: “In 2012 we saw the third highest turnover of any year at £14bn (compared with £17.5bn in 2007 & £15.5bn in 2006).
“But if you consider the prevalence of high levels of debt at the top of the market, compared with more limited availability last year, this actually means that 2012 arguably saw a greater investment of equity in Central London than ever before.”
