London’s commercial property market is seen as a safe haven for international investment, according to research by Cushman & Wakefield. The real estate brokers and consultants have released figures showing London’s commercial property market leaping 64% in the amount of transactions made in Q2 2011 from the previous quarter, with around 66% of these coming from overseas investors. This is attributed to a combination of the weak pound, economic uncertainty, international political tensions and easy access into London’s commercial property market.
£5.85bn of commercial property movement occurred in the first half of 2011, which is already approaching the £6.6bn total made in the whole of 2009.
Talk of redevelopment or refurbishment to existing commercial property has helped push site values for new developments up from £100–150 to £200 per sq ft in the City, where thirty-two transactions were completed, amounting to £1.9bn during Q2 2011. This brings the 2011 number of transactions to date to eighty-six, already equalling 2010’s number.
Significant commercial property purchases include investment bank JP Morgan’s £259m for 10 Aldermanbury Square and a Far Eastern consortium’s £288.25m for Aviva Tower.
In the West End, prime rents were up 2.6% over the quarter, and forty-five deals, totalling £1.75bn, were completed. This is up from Q1 2011’s twenty-seven deals totalling £592m. Notable among these were the £452m handed over by Norges Bank for the Regent St portfolio and the £160m given by a private Spanish investor for Jubilee House, Oxford St.
‘The outlook remains strong for further international activity during 2011’ according to Clive Bull at Cushman and Wakefield, referring to ‘the squeeze on supply of good quality investment stock and the continuing low interest environment’.
Domestic investors still feature prominently, with ‘both institutional and property companies’ attracted to the potential for strong rental growth, he added. Commercial property demand is expected to exceed supply of qualifying assets, particularly for prime retail assets, which are described as providing more stable yields and less volatility than offices.
