Partly as a result of a weakened pound, the commercial property market in central London has continued to defy expectations of a Brexit downturn and remains an attractive prospect to many buyers.
Savills noted at the end of August that over £2.4bn was invested in commercial property in July. Total turnover for the year to the end of July was £11.5bn.
Real estate consultancy Cushman Wakefield also reported a jump of £1.38bn in commercial property investment in central London in the first half of 2017, compared to the same period in 2016.
Rather interestingly, Cushman Wakefield also provided an idea of where this investment was originating from by stating: “H1 2017 was the most active first half of the year for Asia Pacific investment in central London in the last five years.”
In fact, investment reached £4.07bn – making up 46% of the central London market.
Notable acquisitions included that of The Leadenhall Building (also known as The Cheesegrater) and One Kingdom Street by Hong Kong’s CC Land, along with the sale of 20 Fenchurch Street (the Walkie Talkie) for around £1.28bn to Hong Kong-based Infinitus Property Group.
James Beckham, head of London Capital Markets at Cushman Wakefield, said: “The recent high-profile visit to Hong Kong to mark the 20th anniversary of the handover is a timely reminder of the region’s impact.”
He added that Asia Pacific investors “are set to continue with strong ongoing interest in assets right across the risk spectrum.”
At Savills, Stephen Down, head of the central London investment team, was of the view that while restrictions by the Chinese government in August were likely to reduce the number of mainland investors, Hong Kong investors were “likely to continue to be active.” However, he added that “their buying criteria had become increasingly selective.”
An increasing interest from European, particularly German, investors has been another facet of the current market. Indeed, of the seven deals valued at over £200m in the City, four were acquired by European investors, of which three were German, including the acquisition by Deutsche Asset Management of 2&3 Bankside for £310m.
This overseas interest comes despite falling yields in the City. In its central London report, Cushman Wakefield observed that while Prime West End yields remained stable at 3.25%, “the sheer weight of money has seen City yields fall from 4.25% to 4.00% over the quarter.”
These recent transactions undoubtedly represent an encouraging trend for a market that had been weary of falling outside the jurisdiction of the European Union. Given the uncertainly still surrounding the Brexit process however, not least the United Kingdom’s access to the single market, it remains to be seen whether commercial property in the City will continue to rise above the current political turbulence.
With a buoyant market, even properties with defective titles are in demand; astute investors will always seek however, to manage risk out of their portfolios with title insurance so that if the market does turn again, they are assured a clean exit.