London retains global crown for office investment in 2018

Despite Brexit uncertainty, London is still the number one global destination for investment in offices, according to new research from Knight Frank. 

Central London commercial offices attracted £16.2 bn (€18.4 bn) of investment in 2018, more than Manhattan (£14.3 bn), Paris (£12.1 bn), Hong Kong (£8.4 bn) and Seoul CBD (£8.1 bn), in the latest rankings.

'London is the most attractive city in the world for long-term investment. It has proved its ability to adapt to meet the demands of the modern global economy, and this is evident in London’s office market,' said William Beardmore-Gray, head of Central London, Knight Frank. 'The growth in co-working space is a positive sign of London’s dynamism and the vitality of the creative economy. London’s resilience and reputation as a safe haven for investment, despite Brexit, is remarkable.'

Frankfurt was the only other European city to make the global top 10, with £7.4 bn of investment in offices placing it sixth.

While total investment volumes for Central London were down slightly on 2017 (£16.8 bn) the average deal size rose to an all-time high of £81.5 mln in 2018.

Asian capital
Greater China remains the largest source of investment in Central London real estate, despite new capital restrictions imposed this year, accounting for £3.48 bn in 2018 and 21% of all investment in Central London offices last year. Although Greater China remains London’s biggest source of capital, the total volume of investment from the region was down 51% on 2017, when Central London saw a record £7.12 bn invested into commercial offices from Chinese investors.

2018 saw South Korea significantly increase its investment in Central London, with £2.56 bn invested in the capital, an eight-fold increase on the £300 mln invested in 2017. Capital from the Far East as a whole accounted for 47% (£7.67 bn) of all investment in Central London offices in 2018.

'Although 2019 presents ongoing challenges, international investors remain undeterred. Our global capital tracker identifies £40 bn still targeting London this year, with some seeing the political turbulence and currency weakness as an opportunity, combined with the strong occupational market fundamentals,' said Nick Braybrook, head of Central London capital markets, Knight Frank.

'Whilst demand from Greater China has reduced, they were still very active in 2018. The reduction is also partly countered by increases in demand from Singapore and Japan, and interestingly the tracker shows an increase in domestic demand this year. Domestic demand is often the first to react to improvements in occupier market trends,' Braybrook added.

Beardmore-Gray added: 'We see further positive transformation in the pipeline, as London is set to become a centre of scientific R&D and will draw capital from new investors unknown to the market before. London’s potential continues to grow, with new sub-markets emerging in Nine Elms, Stratford and White City,'

'Leaving the European Union will be difficult, but as long as London has fantastic infrastructure and places, great institutions and security, excellence in education and an abundance of talent, property occupiers and investors will continue to flock here from across the globe,' Beardmore-Gray concluded.


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