Investment in London’s commercial real estate sector is on track for a record-breaking year as international buyers flock to the capital.
Property adviser Savills predicts that the total volume of commercial real estate transactions in central London during 2017 will top £20bn, and could end the year higher than the previous record level of £21.6bn set in 2014.
Commercial property transactions in central London in the first three quarters of this year hit £14.2bn, with buyers originating from more than 27 different countries. The average final quarter turnover in the last five years is £6.6bn, leading Savills to predict that 2017 volumes could “easily exceed” the £20bn threshold and hit a new annual record.
Specifically, commercial property investment in the City is expected to reach or beat the record of £12.6bn set in 2014. Investment in the Square Mile for the first three quarters of this year has already beaten the full-year total for 2016. Volumes hit £8.5bn by the end of September – six per cent higher than 2016’s annual total of £8.07bn.
Stephen Down from Savills said: “UK real estate, particularly prime assets with strong income streams in the capital, continues to appeal to a broad spectrum of international investors, while outside this sphere of interest there is also demand from a broad professional investor base so long as properties are priced correctly.”
Robbie Duncan, director of research at Numis Securities, said: “The transaction volume in the commercial property sector recorded this year is fantastic and it goes to show that London has not closed for business after last year’s EU referendum. However, it’s important to note that sales of two big buildings [the Cheesegrater and the Walkie Talkie] make up a huge chunk of that investment.”
Duncan also predicted that Japanese investors looking to diversify will explore property investment opportunities in London next year.
However, British Property Federation boss Melanie Leech warned that the sector needs clarity over a Brexit transition deal to maintain high levels of investment in the capital.
“We are urging the UK government to work in partnership with us to maintain business and investor confidence as Brexit unfolds, and to ensure a smooth transition to the new arrangements that will follow the end of the two-year negotiating period in 2019,” she said.