Middle Eastern Investment in London’s Commercial Real Estate Gains Strength
Financiers from Middle Eastern states are making substantial investments into commercial real estate in London, in contradiction to negative headlines regarding Brexit. Indeed, figures show that investment from the Gulf actually increased post-Brexit; of the £1.8 billion ploughed into London’s commercial real estate in 2016 from investors in the Middle East, the vast majority (£1.2 billion) came after 23 June.
Investors from the region are attracted to prime freehold assets, upward rental trends, long leases and capital growth which offer a “quasi bond-type investment”. Add to that the weakening of sterling, which recently benefited the Abu Dhabi Financial Group when closing its 2014 deal to purchase London’s New Scotland Yard for £291 million, commercial real estate in post-Brexit London has become even more appealing to these investors. Headlines regarding the threat of parts of the financial services sector relocating away from London have not acted to put off investment; reports state that since 2007 only 9 per cent of leasing activity in the City of London has actually been to banks.
This appetite to invest is highlighted by the recent purchases of prime real estate in London’s West End by Qatar’s Alduwaliya Asset Management; Sony’s 70,000 square foot headquarters was purchased for £104 million in September last year and a neighbouring 23,000 square foot property, also let to Sony, was purchased for £30.5 million only last month.
This sentiment has also seemingly spread further East to China, where the main outward investment agency for international real estate has reported a 40 per cent increase in sales enquiries regarding real estate in the UK, stating that “the UK looks like the same old safe haven … but cheaper”.