Overseas investors’ dominance has increased in the London investment market despite Brexit uncertainty, according to Avison Young as part of its North America and Europe Commercial Real Estate Investment Review.
London’s commercial real estate market registered a surge in investment transactions in the first-half of 2017 as Greater London sales of office, industrial and retail assets totalled £9.7 billion. This total represented a 36% increase in overall transaction volume from the same period in 2016 and 29% above the five-year average.
Jason Sibthorpe, Avison Young Principal and Managing Director, UK, comments: “The surge in transaction volumes is remarkable considering the fears surrounding Brexit and the uncertainty caused by the snap national election that occurred in June 2017.
“London has retained its safe-haven status despite this uncertainty. As a result, overseas investors have increased their dominance of the investment market.”
Overseas investors accounted for 68% of investment transactions in Greater London in the first-half of 2017, up from 57% in the same period in 2016. Far Eastern investors accounted for 51% of the overseas investors. German investors also returned to the London market and accounted for 19%, which was up from the five-year average of just 6%.
Jason adds: “It is interesting to note that the remainder of Europe only accounted for 6% of the overseas investors in the first half.” He explains: “The large increase in total trading volume could be slightly misleading as some big deals have moved the dial. In first-half 2017, there were 39 deals of £100 million-plus, compared with 24 in first-half 2016.”
Recent deals include the second-largest single-asset property deal in U.K. history when CC Land Holdings acquired London’s tallest office building, nicknamed the Cheesegrater, for £1.15 billion.
Investment in lower-value trades was more subdued. The flow of capital into the U.K. commercial property market will likely continue apace in the second half of 2017 (and into 2018) despite the country entering a period of heightened political and economic uncertainty. Jason continues: “This resilience is due to a number of factors, including somewhat unexpected leasing market optimism, the ongoing appeal of U.K. real estate in the ultra-low-interest rate and bond-yield environment and the weak pound Sterling providing good value for overseas buyers. With investors seeking security in these uncertain times, the flight-to-safety trend is expected to continue.”
