International investors continue to flock to London with the improving economy and the capital’s “safe haven” status combining to create a lucrative environment. As a result, investment in the central London property market has hit a record high, with overseas parties playing a prominent role in this success.
In the first quarter, several big ticket deals in the City and Docklands, paired with deals involving trophy schemes throughout the capital, led to the highest ever investment volume London has ever seen. Data from global real estate solutions firm Cushman and Wakefield shows the total investment in the three months to the end of March equalled a staggering £3.31 billion.
The aforementioned City and Docklands deals played a big part in this total, with the top five accounting for £2.35 billion. This equates to around 71 per cent of total investment excluding acquisitions.
The largest acquisition was Kuwait’s sovereign wealth fund, St Martins’, purchase of the More London portfolio, with the eventual agreement amounting to £1.7 billion. Accounting for over half of the total investment volume in the first quarter, this was also one of the largest commercial property deals the UK has seen to date.
Partner in Cushman and Wakefield’s City investment team, Bill Tyser, is confident that this new record will be toppled in the near future as momentum continues to build in London’s booming commercial property market.
He says; “From a global perspective, the City of London’s prime yield profile remains attractive and there continues to be a considerable weight of money, both domestic and international, facing the market.
“As the second phase rental recovery builds, coupled with positive outlooks on the UK economy and employment growth into London, we can expect continuing strong activity and further yield compression as we move through 2014.”
Overseas cash accounted for 77 per cent of total investment into London property. However, domestic buyers were the most active, in terms of numbers, with the completion of 23 deals over the quarter garnering a total of £765.5 million –demonstrating the confidence domestic investors have in the London market.
Unfortunately, the issue of demand vs supply proved to be a problem in the West End as, although the desire to invest in the area is stronger than ever, there are simply too few properties available to satisfy demand. This resulted in investment volumes for the district falling by 20 per cent to £824 million, with the Jaeger House and Waterstones’ flagship store acquisitions being the primary deals of note.
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