In 2018, investment in London’s commercial real estate was strong. According to the latest reports from Knight Frank, the total number of deals reached $21 billion, pushing London ahead of Manhattan to take the top spot worldwide.
Since the Brexit vote, London office values have continued to hold near record highs, thanks to a flood of overseas capital attracted by the weak pound (the pound’s value has fallen 13% against the dollar since the referendum in 2016). Lasting demand for London office space has appeared to have outweighed concerns over the UK’s exit from the EU next month.
Nick Braybrook from Knight Frank said: “If it weren’t for Brexit, there is no reason why London yields wouldn’t be as low as Paris and Berlin.”
Although total investment decreased from the previous year, the average deal size in 2018 was a record breaking $106 million.
With over $4.5 billion in office deals, mainland China and Hong Kong represented the largest source of foreign investment, despite a 51% decrease from 2017. Meanwhile, South Korean investment in London office space grew to over $3.3 billion. Goldman Sachs’ sale and leaseback of its new London HQ to Korea’s National Pension Service, the second-largest deal ever for a London office building, equated for nearly half of the $3.3 billion sum!
Korean firm Hana Financial Group also shed out around $240 million for London’s One Poultry Building, an establishment that’s fully occupied by WeWork. A deal that closed in December 2018.
Brexit and the rest of Europe
It seems that Brexit may not have alarmed commercial investors in London. Their impending ‘divorce’ with the EU has also benefited many other markets in Europe. Frankfurt is the likely destination for many bankers leaving London after the split, which saw record-breaking commercial real estate transactions in 2018.
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