Commercial property investment in the City of London and the West End has defied Brexit uncertainty to hit £3.2 bn (€3.71 bn) in the first quarter of 2019, more than in the same period of the year before the UK voted out of the European Union.
The figure also represents a 28% increase on Q1 2018 - when investments totalled £2.5 bn (€2.89 bn) - with US buyers driving demand this year, according to research by adviser, Savills. American transactions comprise 45% of the total, achieved by only four properties with a combined value of £1.43 bn (€1.6 bn). Meanwhile, domestic buyers have bought the most, purchasing 23 properties for a combined £906.6 mln (€1.04 bn).
Meanwhile, Citigroup’s £1.1 bn (€1.27 bn) acquisition of its EMEA headquarters in east London’s financial centre, Canary Wharf, is another sign of confidence in the city, Savills said.
Stephen Down, head of central London investment at Savills said: ‘Despite the well-noted uncertainty hanging over the UK at the moment, this has not stopped a number of commercial property investors from recognising London’s innate strength. Several of them actually see now as an opportunity and the deals that are offered to the market still seem to draw in a healthy level of prospective buyers, both domestic and international.
‘We have seen a particularly strong appetite for commercial development and opportunistic stock, which is a response to the structural supply shortage that Central London is facing in the office sector.’
Office take-up dips
Despite the rosy investment picture, office take-up in central London fell 21% year-on-year in the first quarter of 2019, down to 2.9 mln sq ft (883,920 m2), according to research by Knight Frank. A rush to secure pre-lets amid tight supply has been identified as a factor, along with occupiers responding to expansion-led requirements.
Social media giant Facebook made the largest transaction in Q1 this year, acquiring 175,000 sq ft (53,340 m2) at its HQ at Regent’s Place, in Brock Street.
William Beardmore-Gray, head of central London at Knight Frank, said: ‘Despite the Brexit haze, the London leasing market remains resilient. Whilst there remains subdued sentiment across the market, overall office take-up in the first quarter was only four per cent below the long-term first quarter average. Furthermore, with nearly four million sq ft of office space under offer across London, we are facing a supply squeeze.’
Faisal Durrani, associate, London research, Knight Frank said: ‘The bottom line is that the supply pipeline remains restricted, driving occupiers to continue to secure space before it starts to impact their operational strategies.’