London is Still Top Global Commercial Real Estate Investment Target, Despite Brexit

London is Still Top Global Commercial Real Estate Investment Target, Despite Brexit

Commercial News » London Edition | By Michael Gerrity | February 8, 2019 9:02 AM ET

According to Knight Frank's London Report, London retained its title as the world's top destination for investment in commercial real estate in 2018.

London remains by far the biggest global destination for investment in real estate, despite ongoing uncertainty around Brexit, with £16.2bn ($21bn) invested in the UK capital's commercial offices in 2018. This compares to £14.3bn ($18.5bn) invested in Manhattan, £12.1bn ($15.6bn) in Paris and £8.4bn ($10.8bn) in Hong Kong. While total investment volumes for Central London were down slightly on 2017 (£16.8bn, or $21.7bn) the average deal size rose to an all-time high of £81.5m ($105m) in 2018.

Global Commercial Investment Highlights of 2018 Include:

  • Central London commercial offices attracted £16.2bn ($21bn) of investment in 2018, more than Manhattan, Paris and Hong Kong
  • Greater China remains the largest investor in London real estate
  • £40bn  ($51.8bn) of global capital actively looking to invest
Greater China remains the largest source of investment in Central London real estate, despite new capital restrictions imposed this year, accounting for £3.48bn ($4.5bn) in 2018 and 21% of all investment in Central London offices last year. Although Greater China remains London's biggest source of capital, the total volume of investment from the region was down 51% on 2017, when Central London saw a record £7.12bn ($9.2bn) invested into commercial offices from Chinese investors.

2018 saw South Korea significantly increase its investment in Central London, with £2.56bn ($3.3bn) invested in the capital, an eight-fold increase on the £300m ($388m) invested in 2017. Capital from the Far East as a whole accounted for 47% (£7.67bn, $9.9bn) of all investment in Central London offices in 2018.

Nick Braybrook, Head of Central London Capital Markets, Knight Frank reports, "Although 2019 presents ongoing challenges, international investors remain undeterred. Our Global Capital Tracker identifies £40 billion ($51.8bn) still targeting London this year, with some seeing the political turbulence and currency weakness as an opportunity, combined with the strong occupational market fundamentals.

"Whilst demand from Greater China has reduced, they were still very active in 2018.  The reduction is also partly countered by increases in demand from Singapore and Japan, and interestingly the tracker shows an increase in domestic demand this year.  Domestic demand is often the first to react to improvements in occupier market trends." 

William Beardmore-Gray, Head of Central London, Knight Frank also commented, "London is the most attractive city in the world for long-term investment. It has proved its ability to adapt to meet the demands of the modern global economy, and this is evident in London's office market. Big banks like Deutsche, tech giants like Apple and Facebook and life sciences groups like GSK are the heartbeat of our capital. The growth in co-working space is a positive sign of London's dynamism and the vitality of the creative economy. London's resilience and reputation as a safe haven for investment, despite Brexit, is remarkable.

"We see further positive transformation in the pipeline, as London is set to become a centre of scientific R&D and will draw capital from new investors unknown to the market before. London's potential continues to grow, with new sub-markets emerging in Nine Elms, Stratford and White City.

"Leaving the European Union will be difficult, but as long as London has fantastic infrastructure and places, great institutions and security, excellence in education and an abundance of talent, property occupiers and investors will continue to flock here from across the globe."

According to Knight Frank's Global Capital Tracker there is £40 billion ($51.8 bn) of capital looking to invest in commercial real estate, with Greater China the biggest potential investor in London, with £10bn ($12.9bn), or 25% of the total, looking to invest in 2019.

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