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Commercial property investment in London hits six-year high


01-03-2014

By Gavin Jackson


Commercial real estate investment in London hit a six-year high of £19.9bn in 2013, according to figures due to be released on Thursday by Cushman & Wakefield, a property consultancy.

Investment increased 47 per cent over the previous year, although it is still below the pre-crisis peak of £20.54bn in 2007.

Overseas investors flocked to London’s central business districts in 2013, drawn by a weak pound and the UK’s status as a safe haven for capital.

Bill Tyser, head of City investment at Cushman & Wakefield, said, “we have to remember 2013 was faced with potential conflict in Korea, Thailand, conflict in Syria, continued fears over Europe’s economy, America’s debt problems and slowing growth among the Brics.”

Most investment came from overseas, especially toward the end of the year – non-UK buyers made up 72 per cent of fourth-quarter transactions in the City of London and Docklands area and 75 per cent in the West End market.

London’s most popular destination for investors were the City and Docklands, which covers Canary Wharf, and Southwark. Together they accounted for just under 60 per cent of total commercial property investment in the capital.

The market was dominated by a few big deals, including the two largest commercial deals the UK has ever seen. The Singaporean sovereign wealth fund GIC acquired a 50 per cent stake in Broadgate, near Liverpool Street station, for £1.7bn and Kuwaiti sovereign fund St Martins purchased More London, by Tower Bridge, for the same amount. Without these two deals commercial real estate investment would have been lower than 2012.

In fact the five largest transactions made up 77 per cent of the total investment in the last quarter of the year.

Cushman & Wakefield are bullish about the prospects for 2014. Bill Tyser said: “The market is now entering the era of a return to property fundamentals in light of economic recovery – principally that of property rental growth, with a controlled supply pipeline and increasing occupier sentiment, decision-making and demand.”

It was a banner year for the West End as well, with investment totalling £8bn in 2013, the highest annual turnover on record.

Rents in the West End have hit an average of £100 per square foot, according to a recently released report from CBRE, a property services group. That report found that London’s West End has overtaken Hong Kong to become the most expensive rental market in the world as scarcity created by strict planning laws combines with heavy demand from hedge funds and private equity groups.

Mike Tremayne, head of West End investment at Cushman & Wakefield, said he believes these trends will continue: “The outlook for 2014 is very positive. With a continuing mismatch between high levels of investor demand and inefficient supply, we see no sign of this competitive market abating.”

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