Foreigners drive demand for London property

Total value of transactions falls 31% on previous quarter

The attractions of central London for overseas investors were underscored in data showing commercial property sales of £2.75bn for the first three months of the year, more than two-thirds accounted for by international buyers.

Foreign buyers made up 71 per cent of the sales figure, reinforcing London’s status as a property market favourite among US, Middle Eastern and Asian investors.

But the total value of transactions fell by 31 per cent on the previous quarter, when it reached £3.98bn, according to figures from Cushman & Wakefield, the property advisory group.

The decline reflected a lack of available commercial property in central London, particularly in the West End, the group said. Much of the total was accounted for by a few large deals.

These include Ropemaker Place in the City of London, bought for £472m by Axa Real Estate; 5 Canada Square in Canary Wharf, acquired by St Martins, the Kuwaiti government property fund, for £383m; Woolgate Exchange, a City building snapped up for about £265m by TPG and Ivanhoe Cambridge of Canada; and the £225m sale of Palestra, a building on the south bank of the Thames, to Deka of Germany.

Bill Tyser said: “Whilst there are concerns over the availability of stock to meet this intensified demand, there are also signs of profit-taking emerging from investors who acquire property at the beginning of this ‘crisis cycle’.”

In London’s West End, £965m worth of property changed hands in the first three months of 2013, down from £1.21bn in the same quarter in 2012. Numbers of transactions also fell from 40 to 33.

The largest deals included 151 Buckingham Palace Road, bought for about £205m by Lembaga Tabung Haji, or the Malaysian pilgrims fund, and 17-18 Old Bond Street, sold to its tenant Prada for about £90m.

Overseas investors accounted for 51 per cent of purchases, Cushman & Wakefield said. It added that over £400m of property was awaiting completion after exchange, with another £1.46bn under offer. Many owners in the West End were unwilling to sell as the cost of breaking loan agreements to make a sale would be too high, it said.

Mike Tremayne, head of West End investment at Cushman & Wakefield, said: “Whilst the lack of available stock in the West End restrained investment volumes in the last quarter, the market continues to act as a target for overseas and domestic investors alike.”

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