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International buyers invest GBP7.7bn in Central London offices in 2016


A total of GBP7.7 billion was invested by international investors into the Central London office market during 2016, according to analysis by Schroders, on behalf of its Central London real estate fund WELPUT.

The US led the way, with investors from the country acquiring GBP1.54 billion of stock last year, whilst investors from Hong Kong bought the second highest volume, spending GBP1.28 billion.
 
However, when judged by netting off property sales, Hong Kong tops the table with a GBP1.26 billion net investment overall. Investors from China, Singapore and Canada acquired GBP988 million, GBP832 million and GBP634 million of stock respectively.
 
WELPUT was the most traded unlisted fund on the UK secondary market over the past year, with GBP212 million worth of units acquired by overseas investors since January 2016. The proportion of international investors in the fund has also increased from 15 per cent to 60 per cent since the fund’s modernisation in 2014, when its investible area was expanded to benefit from changing occupier requirements in locations such as King’s Cross.
 
Nick Montgomery, head of UK investment at Schroder Real Estate, says: “Despite a year of substantial political change, we have seen continued high volumes of investment into the Central London office market from overseas investors. This demonstrates its enduring appeal as a safe haven for capital.
 
“The fundamentals of the Central London market ensure it remains a highly attractive location for investors seeking international real estate exposure. Its time zone and physical location, together with its legal, educational, corporate and financial institutions are key attractions.”
 
GBP715 million was invested by European countries in 2016, with the five biggest buyers of Central London office stock all from Western Europe. German investors acquired the greatest volume of stock of any European nation, spending GBP271 million, whilst Switzerland (GBP108 million) and Luxembourg (GBP80 million) were the second and third biggest buyers respectively.
 
Montgomery says: “Whilst a number of domestic institutions have sought to rebalance their portfolios, the substantial turnover recorded in 2016 is clear indication that the scale, liquidity and transparency of the Central London real estate market remain a key attraction to global investors.
 
“We expect Central London to maintain its position as a global capital for commercial real estate investment in 2017, particularly as international investors continue to benefit from the fall in the value of sterling.”

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