London tops world rankings for office investment in H1 2020, says Knight Frank
Whilst quarterly investment volumes in Q1 2020, which totalled GBP2.6 billion, fell to GBP595 million during Q2, there has since been a surge in activity in London’s commercial office market.
Totalling GBP3.2 billion, the capital has topped the list of global cities attracting the most investment into offices in the first half of 2020.
Nick Braybrook, Knight Frank Head of London Capital Markets, says: “As we expected, the easing of the UK’s travel and lockdown restrictions has been helpful in boosting activity. Despite this, a number of Asian countries still have quarantine measures in place for returning visitors from the UK, which we feel is holding back the market as there remains pent-up demand from many regions in Asia. We’ve already seen evidence of this in the form of The Cabot sale in Canary Wharf for GBP380 million – the largest deal of 2020 – which went to a Hong Kong REIT, Link.
“As more substantial deals are traded in London, this is likely to boost confidence amongst international investors as well as vendors. In fact, we are already seeing available investments on the market increase in response to rising demand. Excluding under offers, we’re now tracking GBP4.6 billion of available commercial real estate opportunities, which is up 27 per cent year-on-year. This bodes well for overall activity from September onwards”.
Faisal Durrani, Head of London Commercial Research at Knight Frank, adds: “As the global and domestic economies continue to be frustrated by the prolonged impact of Covid-19, investors are wary of the prospects of an extended period of subdued growth. Unsurprisingly, they are seeking out traditional safe haven assets in trusted locations in growing numbers.
“This is reflected in the fact that London (GBP3.2 billion) has emerged as the world’s number one cross-border office investment hotspot during the first six months of the year, firmly positioning itself as the global capital of capital. Were it not for lingering global travel restrictions, the figure would have likely been a lot higher. London ranked ahead of Paris (GBP2.8 billion) and Manhattan (GBP1.7 billion).
“With some of the highest office yields in the world that outperform virtually all other asset classes, we are expecting demand for London assets not only to be sustained, but to also grow as investors clamour to secure their capital in the midst of the Covid-19 induced economic uncertainty. In fact, as we ended Q2, there was GBP3.5 billion worth of assets under offer in London, 97 per cent up on Q2 2019 and a fifth higher than Q1 2020”.