What Brexit, the General Election and foreign demand means for London's commercial property market

 
Shruti Tripathi Chopra
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Inside The City Of London's New Landmark Skyscraper
A total of 13 deals worth £100m or more were conducted in the first quarter of 2017 (Source: Getty)

Martin Samworth practically lives on a plane. As the chief executive for Europe, Middle East and Africa (EMEA) for one of the world’s largest property consultancies CBRE, he’s a busy man. In the last few weeks, he has travelled to Madrid, Colorado, Dusseldorf, Tel Aviv, Frankfurt, Lisbon, and New York.

The property veteran, who joined CBRE over 30 years ago, spearheads a region that includes 23,000 employees and 141 offices across 40 countries.

However, he may well spend more time in London this year due to “more significant” commercial property deals in the pipeline for the capital amid strong interest from foreign buyers.

Nearly £5bn worth of commercial property transactions took place between January and March in London this year in what was the biggest quarterly total since the end of 2014, according to CBRE.

A total of 13 deals worth £100m or more were conducted in the first quarter of 2017, compared with 11 in the previous quarter.

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“London, in particular, holds a lot of appeal for international investors,” Samworth tells City A.M. “Overseas investors accounted for 80 per cent of the transactions by volume in the first quarter. I think that’s a huge vote of confidence in London and its real estate.”

In one of the biggest commercial property deals in London this year, the Leadenhall Building, aka the Cheesegrater, was snapped up by Hong Kong-based CC Land for £1.15bn in March.

Asian property tycoons are reportedly circling two other iconic City towers, the Gherkin and the Walkie Talkie.

Samworth remains tight-lipped about any impending deals for the skyscrapers but stresses that London will continue to woo foreign investors this year.

He adds that the fall in the value of the pound following the Brexit vote has drawn more overseas buyers to the capital.

“The slump in the value of the pound clearly makes real estate cheaper and more attractive for acquisitions. It has had a positive impact on how investors see London in particular in terms of value and returns the city can generate,” he explains.

Read more: Shortage of construction workers post-Brexit may deepen UK housing crisis

What Brexit means for London's commercial property market

The CBRE boss thinks the Brexit vote hasn’t shaken the real estate sector’s foundations but there’s still “a degree of uncertainty” about what’s going to happen, a sentiment big clients and property markets don’t like.

“I do think we would like more clarity over the next 12 to 24 months. There is an optimism for London and the future but I think it would be nice if we could get the next rounds of negotiations underway and out of the way,” he adds.

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Will the outcome of this week’s General Election affect demand for London commercial property?

“Interestingly, talks about the election so far have not diminished people’s appetite for investing in London or taking corporate decisions to invest or deploy capital into their businesses. That momentum has carried on,” he says.

“Again, I think everyone would like to get it [General Election] out of the way and move on. Everyone would like to get to the next stage of the government’s agenda which is to proceed with the Brexit negotiations.”

However, Samworth warns that Brexit implications or the General Election’s verdict aren’t the biggest worries for businesses.

Read more: Why a new wave of foreign millionaires is poised to buy prime London homes

Not being able to find the right talent is what is keeping top bosses awake at night.

“One of the key challenges for businesses is attracting the right kind of talent,” he says. “But for that the capital’s housing demand needs to be met in addition to investment in infrastructure so that people can get across London more easily.”

But these small stumbling blocks do not take away from London’s international allure, Samworth says.

“London will continue to be powerful irrespective of the Brexit vote or the General Election. London has always re-invented itself and it is doing so as we speak. It will always change, evolve and adapt.”

Apart from advising big corporates on their property deals, Samworth has advised his own firm on scaling its business during his three-decade career.

“Organic growth, securing top talent and successful integration of more than 50 acquisitions has driven growth in [the] EMEA [region] over the past 12 years…. in the last 10 years I have personally been involved in around 20 M&A deals,” he says.

Ones he is particularly proud of include the acquisition of retail real estate specialists Dalgleish for £27m in 2005 and niche property investment firm Franc Warwick in 2012.

“The deals arguably brought together the Cristiano Ronaldo and the Lionel Messi of the property world,” he beams.

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