In the first full quarter following the EU referendum, foreign investors accounted for a record share of Central London office investment. Foreign investors spent £1.2 billion and accounted for 84 per cent of total investment in Q3 2016, up from an average of 65% in the last three years. Nationally, foreign investment reached £3.4 billion in Q3 2016 and accounted for 45 per cent of total investment, according to the latest research from CoStar Group, the leading commercial property information provider.
Foreign investors have taken advantage of a weaker pound. A number of investors, such as China Minsheng and Hong Kong’s Wheelock Properties, took the opportunity to make their debut UK acquisitions, showing confidence in the UK and London market. The biggest overseas investment in UK real estate came from the US, with £790 million, and was followed by a total of £600 million from China/Hong Kong.
Investment in Greater London commercial property totalled £3.2 billion in Q3 2016, a 24 per cent drop on the £4.2 billion recorded in Q2 2016 and a drop of 51 per cent drop from Q3 2015. A key factor behind the drop in volume in London was the lack of large deals. Nevertheless, there were a number of notable deals including the acquisition by US bank Wells Fargo of 33 Central in the City for £300 million and HNA’s purchase of 17 Columbus Courtyard in Docklands for £131 million.
Away from the office sector, retail investment registered its strongest performance since Q2 2015, totalling £590 million across Central London, a 42 per cent increase year on year. Notable deals include British Land’s disposal of Debenhams on Oxford Street for £400 million to a private Swedish investor and Norges Bank’s £124 million acquisition of 355-361 Oxford Street from Aberdeen Asset Management at a 3.55 per cent yield.
A total of £8.7 billion was invested in UK commercial property in Q3 2016, a 42 per cent drop from the £14.9 billion invested in the same quarter last year. Investment has been moderating since the middle of 2015, reflecting the cyclical slowdown reported by CoStar previously. The amount of capital spent outside London also moderated in Q3, but volumes held up better than in London.
