Of the £19.7 billion transacted in central London’s commercial property market in 2017, 77 per cent was by non-domestic investors. Overseas capital has become a defining feature of London’s investment market, playing an increasingly dominant role and, through our extensive global connectivity at Savills, we have seen first-hand the level of demand from around the world. 

The prevalence of Chinese investors in London in recent years, particularly those from Hong Kong, has been well documented but let’s not forget the other overseas parties all vying for a slice of the capital’s real estate. We recorded investors from close to 30 countries contributing towards London’s overall investment volume in 2017 and this year we have seen the depth of interest spread.

Increased regulation of Chinese outbound investment suggests we may not see the same influx of capital from China and Hong Kong into London that we have done in the last two years – although how any longer term change to regulation takes shape remains unclear. What we are seeing in 2018 is new parties and nationalities arriving, or becoming more competitive. Notably we have seen South Korean investors have greater buying success in London year to date, and a return of UK institutions, which accounted for 50 per cent of all acquisitions in the West End between January and April 2018.

The sheer weight of capital targeting London has been perhaps one of the biggest surprises of the post-referendum period. Notably, this level of investment into the office market occured despite the Brexit scaremongering of big businesses relocating elsewhere; ominous rumours which arguably are fading.

Telling is an article that appeared in Reuters in April that analysed the number of jobs being advertised by JP Morgan, Morgan Stanley, Citigroup, BAML and Goldman Sachs. At the time, between the five banks there were 1,544 UK vacancies advertised, and ‘less than 200’ in Dublin, Frankfurt and Paris combined.

London’s strong occupier story and the returns available to investors (as prime yields on London offices remain higher than those in much of Europe and Asia-Pacific) is drawing global interest. Yet many of the international investors transacting in London are making decisions based on push factors and comparative risk in their own markets. These investors continue to recognise London as a safe haven.

At the end of the first quarter of 2018 investment volumes had begun to slow, as the number of available opportunities failed to keep pace with strong demand. Yet the city’s resilience to market pressures and uncertainty makes it a key player within the global real estate investment market and an exciting prospect to many buyers. 

The uncertain geo-political climate which we have grown used to operating in has, expectedly, increased interest in prime property assets located in core markets and, as such, appetite for London looks unlikely to wane in the near term.

Our challenge going forward will be unearthing new investment opportunities in which this level of demand can be satisfied. If you are a London landlord and you sell your asset, the simple question remains: where would you re-invest your money?

Further information

Read more: West End Investment Watch