London’s Commercial Property Trumps the Rest of the UK

on May 2, 2013

It seems that the ever-growing gap between the London property market and the rest of the UK has widened even more, with the UK capital having single-handedly attracted a larger commercial property investment volume in 2012 than the rest of the country combined, a new report from broker DTZ shows. According to the report, last year the commercial property sector in the capital reached record levels in terms of purchases, driven by strong demand from overseas buyers.

**London property in demand**
2012 was a strong year for the London commercial property market, with the sector attracting a record investment volume of £16.1 billion. That represented a 48 percent year on year increase on 2011, according to Los Angeles-based real estate broker DTZ and compares with an 18 percent drop to 15.9 billion pounds in the rest of the UK. According to DTZ, the main factor for the sharp increase in investment in the capital’s commercial property stock was robust interest from foreign buyers.

“The surge in investment activity in central London can be linked to very strong demand for prime U.K. assets from foreign investors,” Ben Burston, head of UK Research at DTZ, wrote in the report. “London offers large lot sizes and liquidity.”
And while commercial property investment activity from overseas investors increased across the country as a whole (overseas buyers spent £16 billion on UK commercial property last year, a 61 percent from the previous year), it was the London property market that benefited the most.

**Notable deals**
!m[](/uploads/story/2082/thumbs/pic2_inline.png)Last year saw many foreign investors from all over the world flocking to the UK capital to buy income-producing office buildings, stores, and warehouses. One of the biggest deals during the year was the 330 million-pound purchase of Devonshire Square near Liverpool Street Station by Blackstone LP, the world’s biggest private equity firm. Another notable deal the acquisition of Linklaters LLP’s headquarters in London by Malaysian fund Permodalan Nasional Bhd. Also Brookfield Office Properties Inc. acquired a £518 million portfolio of buildings from Hammerson Plc.

**Attraction to international investors**
But despite the somewhat expected dominance of the London property market, according to DTZ, the UK as a whole remains a very attractive destination to international investors. The broker pointed out that the country was Europe’s biggest property market and the second most liquid after Sweden. Hans Vrensen, the company’s head of global research highlighted the liquidity of the market, pointing out that without the ability to “buy into and then later sell out of a market, relative value is immaterial”.

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