Domestic buyers account for 50 per cent share of London commercial property market as travel restrictions continue to impede global investors
UK investors accounted for 50 per cent of all deals completed in Central London’s commercial property market in Q3 2020, says Savills, to take a 53 per cent market share (GBP1.435 billion) of 2020 overall activity.
It is the first time since 2006 that domestic buyers have accounted for more than half of all investment activity in Central London’s commercial property market as the UK Capital City has evolved into one of the most sought-after investment markets for global capital.
European investors remain the top overseas investor group operating in the market with a 17 per cent market share (GBP1.356 billion). This compares to Asian investors (12 per cent market share), North American (10 per cent) and Middle Eastern (7 per cent)
According to the latest figures from Savills, GBP1.275 billion was transacted in Central London’s commercial property market in the third quarter of 2020, taking the total volume invested YTD to GBP4.362 billion. 2020 volumes mark a 46 per cent drop on 2019 activity which saw over GBP8 billion invested between Q1-Q3, and a 58 per cent drop on the five year rolling average for this period.
Stephen Down, head of the Central London investment team at Savills, says: “Traditionally the quietest quarter for activity, Q3 in 2020 has seen investment volumes further reduced by the ongoing travel restrictions brought about by the Covid-19 pandemic preventing a large pool of global buyers to view properties and trade in London. With a huge wall of global capital looking to find a home, and a significant proportion deriving from property funds and pension vehicles that need to act before the end of the year, we are anticipating a notable uptick in investment activity in the final quarter. This is reflected by the increase in available stock on what has been a starved market, with circa GBP6.58 billion* of assets known to be available in London. However, not all of these buildings will sell and, as the search for core/ core+ risk-free assets becomes ever more pronounced amidst the ongoing uncertainty, the gap between prime and secondary is expected to grow and pricing needs to reflect this.”
In its European investment report released earlier this week, Savills cited London as “the most transacted office market over the last ten years” that “will pique investor interest” when “liquidity of global capital remains high and mostly in search of safe havens”.
Savills Prime Yields remain at 4.00 per cent in the City and 3.75 per cent in the West End.
Notable UK investor acquisitions in Q3 2020 include: CBREGi purchasing the freehold interest of 6 Brewhouse Yard, EC1 in July 2020 for GBP29.6 million; Sir Lloyd Dorfman’s family’s property interests acquiring the long leasehold interest of 2 & 4 Soho Place W1 from Derwent London for GBP40.5 million; and CLI Dartriver paying GBP30.5 million for the long leasehold of Liberty Place, 4-12 Norton Folgate, E1 in September.
Key European investor transactions to complete in London in Q3 include the sale of 44 Whitfield St, W1 in August 2020 for GBP19.5 million to a private European investor (Savills advised the purchaser).