London’s commercial real estate drew a huge proportion of non-UK investors in 2013, all seeking a high returns. Foreign investors accounted for 72% of all transactions which took place last year.
Even the first quarter, a time notorious for its quietness, witnessed £4.3 billion of investment.
Investors are making the most of the changing markets in China, South Korea and Southeast Asia which have recently allowed their people to invest their pension funds outside their own market. Sovereign wealth funds and real estate private equity houses are also buying a great deal of London commercial real estate
.The assets offer diversification and off protection against inflation. Owning London property also offers a steady income from the capital growth and guaranteed rental payments.
Last year saw two of the UK’s biggest deals ever take place, each worth £1.7 billion. This was made up of the Singapore sovereign wealth fund GIC buying a 50 percent stake in the Broadgate complex, and the Kuwaiti firm St Martins Property Group acquiring the More London development.
Contrastively to the US, where investments are mainly domestic, overseas investment in London has seen a massive increase recently and is expected to continue to rise substantially.
James Dodsworth is a partner at White & Case, and he says “We are going to continue to see some large and interesting transactions for some time to come”.
This could be due to kinder tax laws in the UK, with corporation tax expected to reduce to 20% by 2015. The transparency of the London marketplace and the predictability of its leasing structure have been cited as other attractive features, according to George Roberts, who operates in the occupier representation team at Cushman & Wakefield.
One of the senior research managers at Deloitte’s real estate team agrees with this view that “Everything we’re doing at the moment suggests that London is set to remain one of, if not the leading center, for a huge variety of different industries.”
A great deal of worldwide multi-national companies are signing contracts for new offices and leases with very high rents, leading Roberts to add that “growth is sustainable.
London’s attraction as a global financial center and a gateway to Europe gives us the confidence that wealth funds will continue to be here come 2020.”