London Investment approaches pre-recession peak in 2014

Posted on 21 January, 2015 by Kirsten Kennedy

Although the London commercial property market has proven immensely strong since the end of the financial crisis, in the years to 2013 it was yet to reach the heights of the pre-recession peak in 2007. However, in 2014 overseas investors and a growing number of domestic buyers managed to bring total investment in the City of London and the Docklands on a par with the previous peak.

London Skylines at dusk England UK at night

According to research by global real estate advisor Cushman & Wakefield, 2014 saw investment in the central London market rise to £20.5 billion, only marginally below 2007’s total of £20.6 billion.

In the City of London and the Docklands, the total reached in 2014 was £13.8 billion, with £5 billion invested in the final quarter of the year alone.

Meanwhile, in the West End, investors pumped £6.7 billion into the local market during the year as a whole, with £2.4 billion invested during the fourth quarter.

Although international investors continue to dominate the central London market as a whole, there is something of a disparity between interest levels in the City and Docklands and the West End. The former areas saw overseas investors account for 78 per cent of deals in both the fourth quarter and the year as a whole, while the West End saw considerably lower levels of international transactions, coming in at 61 per cent in Q4 and 55 per cent for the full year.

Head of City of London investment at Cushman & Wakefield, James Crawford, believes that international investment will continue to boost the market for the foreseeable future.

He says; “We saw a strong City of London investment market in 2014 with international investors dominating acquisitions.

“The international appeal of London continues with an ever increasing spread of new global investors entering the market – and there are no signs of an imminent slowdown.

“Deals from £1 million to £1.2 billion closed during 2014 and capital values hit an all-time high of over £1,400 per square foot at the Gherkin.”

In the City and Docklands, the fourth quarter saw Asian investors – including some of the world’s largest sovereign wealth funds – become dominant in terms of acquisitions, despite the fact that North American investors spent the most money in the year as a whole. It was a different story in the West End, however, as although North American investors remained at the top with a 19 per cent share of all transactions, European investors followed relatively closely behind with a 14 per cent share.

Andrew Thomas at Cushman & Wakefield’s West End investment team says; “In 2014 we saw the return of the UK funds as major investors in the West End.

“As the prognosis for growth appears strong for the West End market, the outlook for 2015 looks positive – particularly for assets which allow for such growth to be captured early.”

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