With all the noise surrounding Brexit you would be forgiven for thinking that London is teetering on the edge of economic purgatory being cut off from the supply of cautious global capital.
The reality is an altogether different story with London continuing to be a global gateway attracting major investment from across the world seeking stable, long-term growth investments.
London’s fundamentals haven’t changed – talent, time zone, currency, language, culture, infrastructure, liquidity, rule of law – all of which ensure that it remains a key economic centre and provides a diverse economy. The growth of creative industries over the past ten years has given London a new edge in the occupational market, with office demand from this sector now outstripping that of banking and finance.
In the last decade, London has consistently outperformed Berlin, Madrid and Paris in terms of population, employment and GDP growth, further illustrating the enduring appeal of the Capital to global investors looking for diversification in to Western Europe.
Preferences are also shifting, with the most important drivers for occupiers being the quality of the space itself, rather than simply its proximity within London. The London market excels in this regard, offering some of the highest spec, modern and flexible real estate available.
This has led to large-scale investment and development across the Capital, with swathes of London also set to benefit from the Elizabeth Line, Northern and Bakerloo Line extensions, High Speed 2 and Crossrail 2 in the coming years. This means that new areas are now being unlocked across the metropolitan area providing more attractive pricing than the previously saturated central locations and offering greater potential returns for investors.
One of the most critical sources of global investment has come from Asia Pac, which in recent years has been playing an increasingly significant economic role. Asian investors continue to purchase offshore real estate, searching for diversification and stable income, with commercial space being a major target.
In CBRE’s recent ‘Global Investor Intentions Survey’, 89% of Singaporean investors indicated their intention to invest overseas. Similarly high numbers were seen from Korea and Hong Kong with 80% indicating the same intention to invest overseas.
Asia Pac investors have been dominating the market and there is reason to remain optimistic about London continuing to attract them. Between 2016 and 2018 alone, London office investment turnover from Asia Pac investors totalled USD$24.2 billion, with 64% of those targeting long-term stabilised assets.
Among other major gateway cities London continues to rank as one of the preferred destinations for Asian capital. Two critical investment metrics for Asia Pac investors are market size and liquidity. London is consistently in the top five globally for both, crucially ranking as the most liquid market in Europe. Moreover, the previously attractive U.S. real estate market is increasingly unattractive due to tax and protectionist policies thereby shifting Asia Pac investor attention towards Europe.
In an often febrile global economy, London is showing yet again that it continues to offer stability and security for global investors, particularly in the commercial real estate space. In spite of headwinds, the capital remains set to continue as an enduring powerhouse.
By James Beckham, Head of Central London Investment, CBRE