At the beginning of the year, many leading newspapers and commercial property publications announced that the London property market had hit a six year high. According to the Financial Times, annual commercial property investment volumes hit £53bn in 2013, the highest since 2007’s level of £56bn, and nearly a 50% increase on the previous year. One of the most interesting factors about the rise in property investment was that just under half of the transactions across the whole UK were from overseas buyers.
According to Cushman and Wakefield, a large real-estate firm, there are more active overseas buyers of commercial property in London than domestic buyers. In the last quarter of 2013, 80% of purchases in the City & Docklands area were made by International Investors. The overseas vendors in London were so active that they accounted for 72%, and UK buyers, which were mainly property companies, accounted for 27%. The transactions made by international groups tended to be larger than the UK-based buyers. For example, the Unilever headquarters in Leatherhead, Surrey, were bought by Malaysian company Lembanga Tabung Haji for £76m in December. According to the Association of Foreign Investors in Real Estate, London has just topped New York as the number one destination for foreign investors buying commercial property.
During 2013, a top business trend was the growing investment of Chinese businesses in other countries; including Britain. Knight Frank, a leading real estate consultancy, believes that Chinese investment in London is set to rise further in the next year. In the last year alone Chinese investors purchased £1.2 billion of real estate in London; particularly office space. The overall investment for central London offices hit a record £19.6 billion last year and the physical office space has increased by 13.1 million square feet. Chinese companies are keen to acquire occupational office space in London, as their businesses flourish in their own country and make foundations in other economies. Knight Frank are aware of 30 Chinese companies, or institutions, who are currently occupying office space in central London, and their office in China is surveying 40 more businesses looking to invest up to $100 million overseas.
The Chinese and other far eastern companies find London attractive because it is good value compared to real estate in their own countries. Asian companies have the money to spare to afford London’s prices: this leads to a prime yield of 125 basis points higher than in most far Eastern countries. A lot of far Eastern countries, including China and Singapore, also have exchange rates on their side, so get more value from London properties, and the long leases offered by property agents are a great attraction to Chinese businesses wanting to plant their feet firmly in British soil.
Overall, the boom in the UK commercial property industry is a positive factor for both international and domestic companies. Although overseas investment has been making the headlines of late, just over half of the UK commercial property investments in 2013 were still made by UK companies, and these included one of the biggest transactions for the More London offices. The market is flourishing thanks to more confidence in the British economy and competitive office prices. If you are looking for high quality commercial property in London and the Home Counties, for any size of business, then get in touch with Prideview Properties.