Overseas investors continue to dominate Central London market
According to international real estate advisor Savills, the City and West End investment markets continued to see an increased appetite from overseas purchasers during 2012 accounting for 76% and 67% of overall transactions respectively as London continues to retain a ‘safe haven’ status. This compares to circa 60% reported in 2011 for both markets.
Savills notes that the total transaction volume for the City market was £8.9 billion, while the West End saw £6.1 billion reported. Of the transactions conducted by overseas purchasers, it was the Asian investors that dominated in the City accounting for £2.27 billion of transactions. Savills advised buyers from Malaysia, Japan, Greater China and Korea including the purchases of Thames Court, Lower Thames Street for £165 million and 10 Queen Street Place also for £165 million.
European buyers took the lead in the West End accounting for £1.55 billion with Savills advising buyers from Italy, Spain, Germany and Sweden. Deals of particular note were 1 Southampton Row in Covent Garden for £110 million and Kings Place in King’s Cross for £235 million.
UK investors were also an active force in the Central London market during 2012, with Savills research showing them account for 24% (£2.17 billion) of market share in the City and 33% (£2,019 million) in the West End.
Stephen Down, head of Central London investment, comments: “Central London has continued to appeal to a wide range of investors, particularly from overseas who are generally attracted by the highly liquid market with larger, prime properties that are let on a longer lease, with a secure income and a lower yield. In contrast, domestic purchasers in Central London have been focussed on smaller lot sizes that are multi-let, which could include secondary properties, where they can implement a strategy to work the asset and then remarket.”
Savills research shows that this diversification in appetite is demonstrated by overseas investors generally conducting less deals in Central London with 64 and 79 concluded in the City and West End respectively, but accounting for a higher transaction volume than domestic purchasers who have transacted a higher level of deals at 88 in the City and 89 in the West End, but with a lower overall sales volume.
Rasheed Hassan, director of Cross Border investment at Savills, says: “While the turbulence continues in the wider global economy regarding commodity prices, equity markets and political uncertainty, we do expect this level of overseas interest to be sustained in Central London. In particular we expect to see an increase in the level of Chinese money into London and across the global real estate market following the recent relaxation by the Chinese Insurance Regulatory Commission, which Savills estimates could result in up to £10 billion of new inward investment to London.”