London is a renowned city and one of the world’s most attractive places to do business. The same trend has been present in the commercial real estate sector over recent years: high demand and a lack of supply. The interest is there from investors; occupier demand is high and potential yield strong, giving the volume of transactions the potential to rocket, however, due to the lack of supply, turnover is being affected.
Overseas investment has become increasingly dominant in London’s investment market. A total transaction volume of £3.39bn from Asian capital alone has been invested into the City of London offices so far this year – a record volume! This figure represents 70% of the total investment which has reached £4.9bn. The office market is extremely lucrative with many of the current projects being developed or refurbished already pre-let.
Brexit is looming and has brought with it a cloud of worry and doubt over Britain’s economy. However, unemployment is decreasing and international investment is heavily on the rise. The initial fear of Brexit doesn’t appear to be having the negative impact which was first thought, in fact, there is a positive volume of activity across the market.
Last year there was a record volume of investment in London, up 35% from 2016 taking the capital into the top spot. There has been an impressive number of notable deals including the Walkie Talkie, The Cheesegrater, and 20 Fenchurch Street.
London’s property market has retained its value consistently for an impressive period of time. During the recession the city’s market remained the highest value across the UK, demonstrating the strength of the city even in turbulent times.
Landlords are reporting strong appetite from the leasing market with the technology sector having a major impact on office take-up. It has been reported that in Q1 2018, tech occupiers in the city reached 114,848 sq ft, over half the total take-up seen in the area in 2017! With the technology sector ever-evolving, it would suggest the demand for tech office space will continue to rise. The occupier take-up on a whole reached a record level in Q1 2018 totaling 3.7m sq ft of transactions, the strongest quarter since Q1 2010.
Co-working giant WeWork has become extremely popular, especially with start-up or fast-growing businesses as they deliver a flexible working environment. In January this year, it was reported that the company has become London’s biggest office occupier after the UK government. Their rapid growth is a testament to the demand coming from tenants, showing confidence in the city’s future.
There are some major office developments coming to completion this year and with the demand coming through for acquisition, hopefully, we will see some new projects getting off the ground in the near future.
London is a prominent location within the commercial real estate market and has retained its attractive reputation throughout a period of uncertainty. With Brexit getting ever closer, it is pleasing to see that activity isn’t slowing and the market is holding confidence.