Dubai: UAE investors put up $132 million (Dh484 million) on offices and other commercial properties in London during 2018, part of a $1 billion plus inflow the capital city attracted from Gulf buyers during the period.
Impressive enough numbers, but less so when compared to the $2 billion spent by Gulf investors on London’s commercial assets in 2017. What explains the decline in spending patterns?
“Our evidence suggests that there is a substantial amount of capital waiting in the wings,” said Faisal Durrani, Associate at the London offices of Knight Frank, the consultancy. “However, the shortage of supply combined with the prospect of a better deal in the event pound weakens — depending on the outcome of Brexit — means many investors are taking a wait-and-see approach.”
So, it’s less about concerns over Brexit’s direction than about waiting for the most opportune moment — and property — to get back into the market.
As such, Knight Frank numbers suggest that the UK’s real estate scene was relatively resilient during 2018. This despite the UK government finding itself repeatedly at a loss to nail down any sort of agreement to part ties with the EU.
Investors were willing to be charmed by London’s many obvious qualities than be spooked by Brexit uncertainties. “In fact, during 2018, the city beat other major global gateway locations such as New York, Tokyo, Paris and Singapore, claiming the crown for the largest volume of commercial property investment globally, which amounted to 16.2 billion pounds,” said Durrani. “This figure itself was on par with the level recorded in 2017, highlighting the depth of demand for London’s commercial assets.
“The issue of Brexit is viewed as a short term domestic political issue, which ranks lower on the list of other macro issues such as the simmering trade tensions between the US and China and ongoing conflict in regions such as the Middle East.
“The currency advantage too has certainly played a role in boosting London’s appeal. In fact, the Knight Frank Global Capital tracker currently shows that there is 40 billion pounds targeting assets in London this year, although this will likely be subject to clarity around Brexit.”
The biggest leasing deals in London’s office market during Q1-19
* Facebook — leased circa 175,000 square feet at Regent’s Place, 10 Brock Street;
* Sony — leased 125,000 square feet at S1 Handyside Street, King’s Cross:
* Bulb — leased 76,000 square feet at 155 Bishopsgate; and
* Spaces — leased 72,000 square feet at The Cabot and 69,000 square feet at The Kensington Building.
Source: Knight Frank