Reading the newspapers, you would think that the London property market is wallowing in a Brexit low, but spending habits contradict this. In the first half of 2018 London was the most active commercial property market in the world, followed by Hong Kong and Paris. In fact, total spend on the capital’s property this year totals £7 billion.
So where is all this money coming from? In short, Asian investors. Chinese, Hong Kong and Korean billionaires and firms have recognised that the weakened pound post June 2016 referendum is making Britain a bargain comparable to other markets. More has been spent on London’s commercial property market this year than Frankfurt, Manhattan, Munich and Paris combined, irrespective of the property boom across Europe.
It’s not just commercial property that’s proving to be rich pickings for investors; between 2008 and 2014 overseas companies (registered in just four overseas tax havens) spent at least £100 billion on residential property and land in London alone. Regardless of Brexit jitters London has firmly remained the top destination for international investment.
As a result of the ongoing Brexit negotiations there has been a rising demand for European real estate, however these markets are not considered to be as liquid as London and “has quickly led to exceptionally low yields” according to William Matthews, head of capital markets research at Knight Frank. In contrast to German and French markets, flooded with investment in the aftermath of the Brexit vote, London prices have little changed in the past two years. Another consistent factor is that London is still perceived a safe-haven market with great yields. Fergus Keane, international partner at Cushman & Wakefield, says “London remains a very landlord-friendly city, with long occupational leases and upwards-only rent reviews.”
Despite concerns that post Brexit businesses may exit London, landlords deem the risk of being left with unoccupied premises vastly outweighed by the continued demand for office space in the city. This has been further compounded by nervous developers postponing construction until a Brexit deal has been finalised, meaning that supply is at an all-time low. Jobs within the London finance sector rose by 23,000 to over 1.1 million in the past 2 years, in sharp contrast to the gloomy market prediction post Brexit vote. In addition to this, Centre for London, reported a positive outlook for the London with jobs across all markets up 1.9% in the past year.
This confidence in the London property market was further compounded with the sale of the Goldman Sachs’ Plumtree Court scheme for £1.2 billion to South Korea’s National Pension Service. In a deal that according to Goldman Sachs vice-chairman Richard Gnodde “demonstrates our continued commitment to London” the bank has agreed a deal to lease the property back from their new landlord for 25 years as their new European headquarters. This follows the £1 billion sale of UBS Group’s 5 Broadgate office to Hong Kong-based CK Asset Holdings, proving that business is still very much booming in London.
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