Commercial property investors from the Middle East, Asia and the United States have declared London their location of choice, and the trend shows no signs of changing soon.
There have been several high-value deals completed this year in central London, including the £260 million purchase of the Lloyd’s building by Chinese life assurer Ping An in July. In addition, the Kuwaiti government completed a deal to buy Bank of America’s European headquarters in Canary Wharf for £385 million this year.
Liz Peace, the chief executive of the British Property Federation (BPF) said recently that London continues to lead the country’s recovery. She explained that the city’s credentials as a “safe haven for investment mean that there is a strong demand from overseas.”
Investors have turned to London properties as a source of stable income at a time when returns from other investments, such as bonds, have fallen. Yields in the City are currently about 4.75 per cent. In the West End, investors are realising yields of about 4.25 per cent, according to property group DTZ.
There are a number of other factors contributing to London’s popularity. The city offers overseas investors a cheap source of real estate, particularly in countries that have seen their currencies strengthen against the pound.
According to property value benchmarking company IPD, in the two years since mid-2007, capital values decreased by 41 per cent and 45 per cent in the West End and City of London office markets, respectively. Over the next four years, values increased by 55 per cent and 38 per cent, respectively.
Investment in the City’s West End office market increased to £5.1 billion in the year to June 2013. This figure was up 68 per cent on the previous year, according to IPD. The group estimates that international buyers have accounted for over two-thirds (67 per cent) of the total investment.
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