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Commercial property: Lack of supply demands developments

There is no shortage of investors and developers looking to gain exposure to the Edinburgh office market.

However, as many landlords opt to hold on to their investments – attracted by rental growth and yield compression, there is a growing appetite to refurbish or redevelop older buildings in the Capital to meet the demand for quality office accommodation.

Edinburgh is experiencing historically high levels of occupier demand from a wide variety of sectors, with employers attracted by the city’s talent pool and the quality of life in the Capital.

However, the office market faces dwindling supply and we anticipate seeing a spike in rents as tenants compete for limited space.

Rents for grade-A offices in the city centre are currently around £35 per sq ft and could top £40 next year.

At present, there is little more than 250,000sq ft of prime office space available in Edinburgh and the two speculative developments currently in the pipeline – 
62 Morrison Street and 
20 West Register Street – are mostly or completely pre-let.

The Capital has lost more than 1.2m sq ft of office space to alternative uses in recent years, while take-up is running at 1m sq ft a year.

This poses two big questions: where will the money go? And where can thriving businesses house their growing numbers of staff?

Professional and legal services, the burgeoning tech sector, and a financial industry that continues to thrive – the market has rarely looked so good from an investor’s perspective.

Companies don’t want to relocate, even partially, because the city and lifestyle are key attractions for the talent that is the lifeblood of these service sector businesses.

But there are few – if any – sites in the city for large-scale speculative development still available.

Where possible, landlords are either substantially refurbishing older buildings or selling up, thereby avoiding construction and letting risks.

Competition for refurbished space is likely to hot up as the shortage becomes more acute; we are starting to see businesses actively competing for the best office locations.

Beyond that, the obvious escape valve for city centre-based companies lies to the west, around South Gyle and Edinburgh Park.

With excellent connectivity to the city and available space, we anticipate increasing demand and more interesting developments.

However, the city centre remains the most prized location for wealthy and ambitious, people-focused companies, and – where possible – older buildings will make way for more contemporary offices.

The re-development of Haymarket has been a start, but with investors poised and firms demanding more space, the next few years should see more interesting developments appearing.

Demand for office space around Edinburgh is likely to keep outstripping supply. As a result, rents look set to keep moving higher, especially as the city’s tech start-ups mature into larger companies, with a need to attract talented people.

By ELLIOT CASSELS

Source: Scotsman

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Investor enthusiasm for UK commercial property slumps

Investor enthusiasm for commercial property in the UK has slumped further as sentiment swings towards France and Germany.

Only 27 per cent of international professional real estate investors said the UK is their preferred market, down four per cent in the last 12 months as Brexit uncertainty continues to weigh on investor sentiment.

Meanwhile support for the French market saw a 20 per cent year-on-year increase and appetite for German investments rose by seven per cent, according to the latest commercial property investment barometer by real estate platform Brickvest.

There was also a drop in the volume of assets under management that investors are planning to plough into real estate over the next year according to the quarterly survey of 6000 international professional investors.

Investors are planning to commit 2.5 per cent of their total AUM, a drop of 33 per cent on the planned amount of 3.7 per cent in the second quarter of last year.

Brickvest chief executive Emmanuel Lumineau said: “The latest figures of our Barometer reveal the continued negative effect of Brexit uncertainty on the UK commercial property market among international investors and particularly those based in France and Germany.

“We can expect this to continue over the third quarter and the October deadline at the very least.

“In the meantime, France and Germany are becoming more attractive destinations for international real estate capital.”

By Jess Clark

Source: City AM

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Post-Brexit binge in commercial property?

Pent up demand could see a boost to the commercial property market post-Brexit, according to new analysis of the commercial property market from Shawbrook Bank.

The ‘UK Commercial Property Market Report1, produced by Shawbrook Bank and compiled by the Centre for Economics and Business Research (CEBR) assesses the state of the current commercial property market, exploring the various sub-sectors comprising the market, historic and future trends, and the impact of the changing political landscape.

The Shawbrook report shows that uncertainty over Brexit has weighed on the commercial property sector in recent quarters, as owners and tenants take stock. But despite activity slowing, the market remains a profitable place to invest and deliver a solid income over the medium to long term. Over the past 18 years, the commercial property market has returned 308% to investors compared to 209% for the FTSE100, and yields have remained stable; average yields across the commercial property sector have stood nearly unchanged at 5% since 2015.

Rob Lankey, Director of Commercial Property Investment, Shawbrook comments: “Although uncertainty is present, the commercial property market remains fundamentally resilient in terms of both yield and capital growth. Despite investors taking a wait-and-see approach, we believe many are stockpiling cash and simply postponing activity until we have a definitive Brexit outcome.

“With the long-term view and fundamentals of the commercial property market still compelling, I would go as far to say that we will see a ‘post-Brexit binge’ from professional investors looking to utilise the cash they have stockpiled to take advantage of investment opportunities in the post Brexit landscape. However, not every commercial property investment will automatically generate great returns. Doing your homework on potential investments is more important than ever. There are good and bad opportunities within all sectors.”

Factories, warehouses and other industrial properties have shown the most resilience

Underpinning the resilience of the commercial property market are factories, warehouses and other industrial properties, which over the past few years have become the best performing sector over one, three and five years, with yields in line with the commercial sector more broadly2. Stockpiling activity and strong demand for warehouses from online retailers have helped the sector to withstand economic headwinds to date, however, the unwinding of the stockpiling effect poses a risk to this asset class as does a no-deal Brexit, which would severely harm many of the manufacturers that are the current tenants of the industrial assets.

Table 1: capital value growth across industrial, retail and office properties

Capital value growth
Cumulative capital value growth Industrial Retail Office
One year: Jan 2018- Jan 2019 12% -8% 3%
Three years: Jan 2016- Jan 2019 31% -11% 5%
Five years: Jan 2014- Jan 2019 71% 1% 37%

Table 2: (Initial) yields across industrial, retail and office properties

(Initial) Yields
Industrial Retail Office
Jan-19 4.6% 5.7% 4.5%
Jan-16 5.4% 5.3% 4.0%
Jan-14 6.6% 5.7% 5.1%

 Growing popularity of serviced offices

In the office sector, demand has been strong following the recovery from the last recession. The increasing importance of professional and business services for the UK’s economy provides a strong macroeconomic background for assets in this category and growing popularity of serviced offices is becoming particularly important as new business start-ups and smaller businesses struggle to keep up with rising rents in cities such as London and Manchester and as a result are looking for more flexible spaces.

Retail needs to adapt to remain relevant

For retail properties, a number of factors have come together to create a ‘perfect storm’. On the back of a decade of very low real wage growth, consumers have turned away from the high street and increasingly do their shopping online. Recent research on high streets in Great Britain by the ONS shows that over half (56%) of addresses on high streets are now residential.3

Rob Lankey adds: “The challenges faced by retail won’t be solved by a shift to residential, but the trend will be a significant boost to opportunities for property owners. Irrespective of broad capital value trends, retail property can continue to provide strong rental returns for landlords where the combination of tenant and property location are meeting modern consumer demand. For investors of mixed-use space to realise the full benefits that can be had, there will have to be a level of collaboration in the property sector moving forward. Another beneficiary of the declining high street will be for shared office spaces, such as WeWork which would likely use former retail premises in UK town and city centres”.

Shawbrook Head of Products & Markets, Daryl Norkett adds: “Broadly, if we look at the sub-sectors that are performing today and consider the analysis brought to life in this research, there is opportunity for experienced investors to grow and diversify their portfolios. However, it is important to highlight that the current market requires a certain level of expertise, knowledge, understanding and commitment of time in order to make the right property investment decisions but if you do your homework, it can be a great investment.”

Source: Property 118

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Sharp fall in Scottish commercial property market

An analysis of commercial property sales during the first quarter of 2019 from the Scottish Property Federation (SPF) claims that total the value of sales in Scotland fell by 21 per cent compared to the same period in 2018. The drop in value was largely driven by fewer high-value transactions for this period, with the number of £5m+ sales down by nearly one-third compared to Q1 2018.

The SPF analysis shows a 21 per cent (£203m) year-on-year decrease in sales by value in Q1 2019, with the value of commercial property sales in the quarter totalling £763m. The SPF also reported £3.03bn in property sales across Scotland for the last four quarters, the lowest rolling annual total since Q2 2014.

Property data experts at CoStar reported a similar decrease in investment in Scotland in Q1 2019. Investment volumes fell compared to Q4 2018 and Q1 2018 by 41 per cent and 54 per cent, respectively. CoStar points to investment into alternative assets as the key driver of activity in Q1 2019, with below average investment into Scotland’s industrial and office sectors.

Edinburgh bucks the trend

Edinburgh showed a break from the national trend in Q1 2019, with higher values than the same quarter in 2018. The Capital recorded a total value of £264m in commercial property sales, accounting for 35 per cent of the total value of commercial property sales in Scotland.

Aberdeen also saw commercial property sales recover against the previous quarter, with an increase from £14m to £41m. However, year-on-year, the total value of Aberdeen’s sales fell sharply by £125m.

Glasgow experienced a decrease in the total value of sales by £26m (15 per cent) from the previous quarter but rose by £49m on Q1 2018. Nineteen per cent of the total value of Scotland’s commercial property sales in Q1 2019 occurred in Glasgow, totalling £171m.

David Melhuish, Director of the SPF, commented: “The sales report for Q1 2019 shows a clear fall in total value of commercial property sales compared to the previous year. This aligns with investment data suggesting a subdued start to 2019 for the Scottish commercial property sector.

“However, the sales data does underline the current strength of Edinburgh’s commercial property market, with the Capital accounting for 35 per cent of the Scottish market by value. The investment data also highlights the rise in investor appetite for alternative property asset classes, such as hotels and build-to-rent. For investors, Edinburgh remains a hotspot, while more broadly, low growth and lack of certainty in the economy is weighing down on activity.”

By Neil Franklin

Source: Workplace Insight

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Commercial property investment falls as Brexit impasse continues

Commercial property investment across the Midlands has fallen as the ongoing Brexit impasse continues to have a negative impact on the market, a new report has revealed.

Lambert Smith Hampton’s (LSH) latest UK Investment Transactions(UKIT) report, says that at £10.9bn, Q1 investment volume across the UK dropped to its lowest quarterly total since the aftermath of the EU Referendum in Q3 2016.

Heightened investor caution in the weeks leading up the UK’s scheduled exit from the EU has clearly been reflected in investment activity. £10.9bn of assets changed hands in the quarter, 26% below average and a substantial 34% below Q4 2018, the largest recorded quarter-on-quarter percentage fall in five years.

Adam Ramshaw, LSH’s regional director for the Midlands, said that in Birmingham and the West Midlands a total of £313m of investment deals were completed in Q1, compared to £470m in Q4 2018. Compared to the same quarter last year there was a 33% drop in investments, with a 54% decrease on the figure for Q4 2018.

Across the East Midlands, there was investment of £197m in Q1, a year-on-year decrease of 67% and a 66% drop compared to Q4 2018, added Adam.

The national impasse was most clear with larger lot size deals. Q1 saw only 19 transactions in excess of £100m, the lowest number since Q4 2012 and significantly below the quarterly average of 31. That said, the total numberof recorded deals in Q1 was only 15% below average, indicating a stronger tolerance to current uncertainty across the wider market.

The market was in some respects turned upside down in Q1. For the first time on record, the three traditional core sectors accounted for less than half of volume. Offices took the brunt of the drop-off in Q1, with volume at a ten-year low of £2.7bn, down a substantial 60% quarter-on-quarter and reflecting a moribund period for large-lot size deals in Central London.

Meanwhile, a perfect storm of structural change and Brexit uncertainty saw retail volume sink to its lowest quarterly total on record, at just over £1bn. Industrial volume dropped to £1.4bn in Q1, far removed from the record £2.2bn in Q4 2018 but only 18% below the trend.

Other sectors proved notably more resilient. Hotel & leisure volume of £2.6bn in Q1 was its strongest quarter in 13 years, boosted by a number of portfolio deals and the UK’s largest deal in Q1, Queensgate Investments’ £1.0bn acquisition of the Grange Hotel Portfolio. Collectively, the specialist sectors also bucked the trend in Q1, with volume of £2.7bn being 35% above average and fuelled by twelve Build to Rent forward funding deals.

The heightened caution in the UK market in Q1 was evident across each of the main investor groupings. Quoted property companies were the least acquisitive buyers compared with trend, with volume of £680m at below half the average, followed by UK institutions where volume of £2.0bn was 35% below average. While investment from overseas investors was also subdued by recent standards, tellingly, they remained major net buyers of UK property, to the tune of £3.3bn in Q1.

The All Property average transaction yield moved out by 14 bps in Q1 to stand at 5.48%. While all the main sectors moved out, retail saw the largest outward movement of 68bps to stand at an average of 6.21%.

Ezra Nahome, CEO of Lambert Smith Hampton, said: “Q1 turned out much as we expected, with investors of all persuasions opting to take a backseat in the crucial run-up to the UK’s scheduled EU exit date. For the first time ever, the so-called alternative sectors collectively accounted for well over half of total volume, a telling reflection of the direction of travel in the market and the insatiable demand for long-income deals.

“While many will be relieved the UK avoided a no deal Brexit outcome, frustratingly, the EU’s extension to later in the year will only act to preserve uncertainty in the market. Despite the generally sound fundamentals of UK real estate investment, this is likely to prove detrimental to the rebound in volume we had been expecting for the latter part of 2019.”

By Rachel Covill

Source: The Business Desk

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North’s commercial property market reports healthy start to 2019 and further positivity ahead

THE north’s commercial property sector enjoyed a positive start to 2019, according to the latest market research.

The new report from Lambert Smith Hampton, which covers the first three months of the year, shows the total investment volume of £42.5 million was almost three times higher than the same period a year ago (£17m). However, that figure is 47 per cent below the five-year quarterly average.

The latest Investment Transactions Northern Ireland Bulletin is a continuation of consistent investment witnessed over the last year, but the total of five transactions last quarter is the lowest in five years.

The deals struck in the first three months of year were largely dominated by the office sector, with the largest transaction at the start of 2019 a local government department’s £16m purchase of James House at the Gasworks in Belfast.

Other notable transactions included the £9.6m sale of Donegall House to a private investor group, as well as retail operator Henderson Group’s £7.6m acquisition of a portfolio of petrol filling stations, which they already occupied as tenant

While there were a flurry of large retail transactions at the end of the year, retail was notably absent at the beginning of 2019.

Looking ahead a significant pickup is forecast in the second quarter of the year, with 21 deals either completed or agreed, totalling approximately £75m.

Lambert Smith Hampton director of capital markets, Martin McCloy said the local market continues to be impeded by ongoing political uncertainty.

“It is generally accepted that the six-month extension to the EU/UK withdrawal date and preventing the UK crashing out of the EU in a ‘no-deal’ scenario was the best outcome at the end of the March for the UK and Northern Ireland. However, there is no doubt that the continuation of this period of uncertainty will continue to frustrate the investment market,” he said.

Since the EU referendum in 2016 there has been a steady decline in investment activity in Northern Ireland, with the quarterly average

of the ten quarters pre-referendum (£101m) more than a third less more than the average during the same period post-referendum (£63m)

Coupled with the lack of a Northern Ireland Executive it has led to a ‘wait-and-see’ attitude, which has created a lack of supply to the market. That being said good quality assets remain in demand, according to Mr McCloy.

“Properties with solid fundamentals will remain attractive to investors. A recent report by MSCI reported that Belfast was among the top performing UK office investment markets in 2018. Coupled with the strong office occupier market, we expect that in 2019 office investment will become the predominant asset class in Northern Ireland, over taking retail,” he added.

By Gareth McKeown

Source: Irish News

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Prime UK commercial property rents increase 0.1% in Q1 2019

UK prime commercial property rental values increased 0.1% in Q1 2019, according to CBRE’s latest Prime Rent and Yield Monitor. At the All Property level, prime yields moved out 6bps over the quarter. Overall results in both prime rents and yields were driven by the continued outperformance of the Industrial sector.

Q1 2019 marked the ninth consecutive quarter of Industrial outperformance, with prime rental values increasing 1.0%. This is the sector’s lowest quarterly growth in prime rents since Q4 2015 as the stellar increase of 8.3% p.a. over the previous three years slows to more trend levels. Industrials in the North West reported the biggest increase in prime rents over the quarter (4.3%). Industrial prime yields were stable overall in Q1 2019. At the regional level, Scotland reported a -15bps decrease in prime yields while the Yorkshire & Humberside and North East markets reported increases of 29bps and 25bps respectively.

At the national level, High Street Shop prime rents fell -1.0% in the first quarter of 2019. This was an acceleration of the falls reported in Q3 (-0.4%) and Q4 (-0.4%) of 2018. Shopping Centre prime rents fell ‑1.3% over the quarter, while Retail Warehouse prime rents decreased -1.0%. Overall, High Street Shop prime yields rose 12bps in Q1. Prime Shopping Centre yields increased 12bps over the quarter. Retail Warehouse prime yields rose 25bps.

Office prime rents increased 0.6% overall in Q1 2019. Sector results were pulled up by the Central London (1.0%), Eastern (1.1%), Yorkshire & Humberside (1.2%), and North West (2.1%) markets. No UK region reported a decrease in prime Office rents in Q1. Prime yields for the Office sector were relatively stable overall in Q1 (+1bp).

Robin Honeyman, Senior Research Analyst at CBRE UK, said: “Falls in the Retail sector pulled down the All Property results in Q1 2019, despite the relative strength of Office and Industrial performance. Our Prime Rent & Yield data continues to show prime Retail coming under pressure, both in pricing and rental values.”

By David Tran

Source: SHD Logistics

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UK Commercial Property Set for Rebound

There’s a lot of cash on the sidelines waiting to snap up UK property assets once certainty on Brexit is known, according to real estate investment trust managers. However, they warn the market could see some short-term pain in the meantime.

Equity investors have been vocal in putting forward their expectation of cash flowing into the UK stock market once Brexit is resolved, no matter what deal we get. While it’s unlikely to be as dramatic in property, the asset class remains more resilient than many expected.

There’s money waiting to buy UK real estate, predicts Calum Bruce, manager of the Ediston Property Investment Company (EPIC), from both domestic and overseas buyers. “Once there’s some clarity, there will be a period where people will just digest what’s happen, formulate a strategy and then look to implement that strategy,” he tells Morningstar.co.uk.

Simon Marriott, investment director at London & Scottish Investments, agrees, though has sympathy with those continuing to hold off committing just yet. “I’m a believer when there is some certainty, anything other than no-deal, prices are going to get stronger,” he says.

Bruce explains that there is plenty to like about UK property, particularly for overseas investors looking for a safe haven in an uncertain world. “The UK ticks a lot of boxes for these investors,” he adds. These include a stable economy, favourable political climate for the asset class and yields higher than many other cities both in Europe and elsewhere.

“But why would they invest now if they think there’s going to be a slip in value and their euro or dollar will go further in a few months’ time? That’s why we need some clarity so these investors can go ‘right, now’s the time to come in and invest’.”

However, it seems likely it will be some time until that Brexit fog clears. While Prime Minister Theresa May’s extension to the Brexit deadline is flexible, odds are it will, again, go right down to the wire on October 31.

Therefore, this predicted pick-up in activity is likely to be a 2020 phenomena. Indeed, Nick Montgomery, manager of the Schroder Real Estate Investment Trust (SREI), thinks we’ll see a correction before any recovery comes about.

“Are we at the top of the cycle? If you look at the average for the market, we think values will fall,” he explains. “We’re not expecting a return to 2009 where values fell by multiples of 10%, but we are expecting a correction.”

As a result, he’s been selling some of his lower-yielding assets, including most of his retail portfolio, in order to build some cash and give him firepower once that correction comes.

Despite being late-cycle, Montgomery says there are plenty of opportunities around with “immense polarisation” between sectors. Below, we highlight three areas REIT managers are seeing, or expect to see, opportunities in the UK property market.

Regional Offices
Being the big hub, particularly for financial services firms, and capital, London will garner many headlines when it comes to the outlook for UK offices. However, many are now seeing opportunities some of the other larger cities in the UK.

Both businesses and the Government are beginning to spread their workforces around the country. The BBC has recently set up camp in Salford, while accountancy firm PwC has a new 80,000 square foot office in Leeds.

“These cities are not back-office locations anymore,” says Marriott. “These are all high-quality locations in their own right, with highly qualified workers who have made life changes [to] move out to the provinces because it’s closer to where they were brought up or their quality of life is better [than in London].”

With the UK one of the world leaders in artificial intelligence, companies are looking for more office space around university cities, too, like Oxford, Cambridge, Bristol and Durham.

Montgomery says Schroders is one of the biggest owners of commercial real estate in Manchester, having identified it as one of the “winning cities” in the UK moving forward.

“[Manchester has] great public sector leadership and a disproportionate share of public sector investment, which has drawn people into the city centre, with the population doubling over the course of the last 10 years or so,” he explains.

Retail Warehousing
Unsurprisingly, many are downbeat on the future for retail. Structural headwinds, including the increasing move to online shopping, have meant a lot of retail firms have either gone bust or are on shaky ground.

Those that have survived are now looking to downsize their store estate or reduce the rents they pay as shoppers increasingly eschew a trip to the high street or their local shopping centre.

However, there are still opportunities in retail. Bruce is the most bullish, arguing that the doom and gloom headlines don’t tell the whole story. “Retail is evolving; I don’t think it’s in terminal decline,” he says.

True, he cautions, retailers that have failed to adapt, evolve or change to the new environment will fall by the wayside, but others have done so and are well set to take advantage. Indeed, Bruce likes out-of-town retail parks in places like Hull, Barnsley or Sunderland, which lend themselves most to the click-and-collect model..

As ever, it’s all about good stock selection, of course: “not all retail warehousing is equal”. While the likes of Next and others are known to be looking at decreasing the rent they pay, they are also happy to increase their costs for units in good, profitable locations.

“We have a retail park in Prestatyn and have completed four rent reviews with River Island, Next, Card Factory and Costa and have got an increase on all of them because it’s a good park in a good location,” says Bruce.

The London & Scottish Investments team, which runs the Regional REIT (RGL), have only a small portion of their portfolio allocated to retail and that is overhang from portfolios they have bought.

Despite taking the decision not to consciously invest in retail when they launched their product back in 2013, they also have no plans to sell their two properties, which comprise a shopping centre in Bletchley and retail park in Swansea, any time soon.

“These are yielding well north of 8% so there’s no reason for us to sell them,” says managing director Derek McDonald. “We’ve got one very small void at Bletchley and none at Swansea and we’ve not had any CVAs, so why rush to sell them when they’re not hurting you?”

Central London Offices
Clearly, this one’s most at the mercy of the outcome of Brexit negotiations – and the UK leaving without a deal would not be positive for the asset.

But Bruce says the office market in the capital has been more resilient than expected. “There are people hedging their bets, but I don’t think it’s been as dramatic an exodus as people expected.”

True, the market has hitherto been too expensive for Bruce to justify getting stuck into, and pricing is still not there just yet. However, he’s encouraged that “more things are coming across our desk which we’re interested in doing something with”.

“Rents are probably under pressure more than they are in other parts of the country, but in the main there’s been pretty good take-up and supply is at a reasonable level.”

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Central London commercial property market investment up over a quarter

Commercial property investment in Central London (the City and West End) rose to £3.2 billion in the first quarter of 2019, a 28 percent increase on the £2.5 billion invested in Q1 2018, according to new data from Savills. The firm also claims that investment volumes in Central London in Q1 2019 were also higher than those in Q1 2015 before the UK’s referendum to leave the EU, when they reached £3.14 billion.

According to Savills, US buyers have been the most active investor group in the Central London market in the year to date, accounting for £1.43 billion of transactions (45% of the total), although this has only been across four properties. Domestic buyers are leading the way in terms of numbers of deals acquiring 23 assets, totalling £906.6 million (28%).

Savills highlights that, despite uncertainty in the market, there have been significant capital flows into Central London real estate in Q1 2019. Citigroup’s acquisition of its EMEA Headquarters at 25 Canada Square in Canary Wharf for approximately £1.10 billion is clear evidence of continued confidence in the Central London market.

The sale of 25 Canada Square (pictured) is the eighth deal above £1 billion to trade in Central London over the last five years, joining the likes of 1 Plumtree Court, EC4 (£1.16 billion) and 5 Broadgate, EC2 (£1 .0 billion) which sold in 2018. Savills figures show that 2019 has been a year which has picked up pace, with only 15 properties trading in January to February. March, however, saw 24 deals transact totalling £2.09 billion.

Stephen Down, head of Central London investment at Savills comments: “Despite the well-noted uncertainty hanging over the UK at the moment, this has not stopped a number of commercial property investors from recognising London’s innate strength. Several of them actually see now as an opportunity and the deals that are offered to the market still seem to draw in a healthy level of prospective buyers, both domestic and international. We have seen a particularly strong appetite for commercial development and opportunistic stock, which is a response to the structural supply shortage that Central London is facing in the office sector.”

by Neil Franklin

Soruce: Workplace Insight

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Non-EU investment in London commercial property rose 75 per cent in 2018

Purchases of London commercial property by non-EU investors soared last year, rising 75 per cent on 2017.

But investment from within the EU dropped sharply, according to figures from real estate research company Datscha.

Non-EU investors racked up £8bn in purchases in 2018. That was almost 10 times the amount spent by their European counterparts, who spent £885m, representing a 68 per cent fall on 2017.

Asian and US investors were the biggest spenders. South Korean investors led the way, forking out a total of £2.4bn.

Investors from China and Hong Kong made over £2.3bn in purchases, a fall of more than two-fifths on the previous year. Their reduced spend is likely due to Chinese government restrictions on overseas investment.

Wework and Colony North Star’s share in the £580m purchase of Devonshire Square helped North American investment double to more than £1.26 billion.

Other sources of investment included buyers from South Africa, Israel and Saudi Arabia. Office space accounted for 95 per cent of overseas commercial investment.

The market for commercial property in the City was “influenced by the UK’s political uncertainty and weakening of sterling”, said Lesley Males, Head of Research at Datscha.

“This has still brought positive interest in the City of London from a number of overseas buyers wanting a stakehold in what we believe is an ever-appealing investment zone,” she added.

By Michael O’Dwyer

Source: City AM