It’s hard to deny that 2016 was an eventful year all round and there is probably a lot of people hoping that 2017 will be rather quieter in all the right ways. The property market, however, looks set to keep moving briskly and the market for central London office space is particularly exciting.
The West End and the City generate almost £16 billion of turnover
The City still remains the top destination for investors in the central London office market, accounting for an estimated 8.7 billion of turnover – but only just. The West End is hot on its heels at an estimated 8.1 billion of turnover. This is only slightly down from 2015’s impressive turnover of almost 20 billion and up on the long-term trend of around 14 billion.
A vote of post-Brexit confidence in London
The strong figures for 2016 appear to be due to a convergence of two factors; Investors regaining their confidence in London after the Brexit vote and the devaluation of the pound making London property prices more attractive to overseas investors. Let’s look at these factors individually.
Firstly, Brexit or no Brexit, the fact still remains that the UK in general and London in particular has a lot to offer businesses. It’s more than “just” the facts that it has outstanding infrastructure of every description and an extensive and varied workforce. It’s the fact that it has a welcoming and flexible approach to businesses, including non-traditional and/or disruptive businesses.
Secondly, the devaluation of the pound in the wake of the Brexit vote, could, ironically, actually turn out to be a huge benefit for London. As the return of investors indicates, the UK in general and London in particular have plenty of practice in weathering storms and coming back stronger from adverse circumstances. Even though the Brexit vote shocked a lot of people, Londoners are already making suggestions as to how to manage the process, mitigate the effect and move on. That’s the sort of attitude which gives investors confidence. The reduction of the pound has already helped attract investment from overseas and this could in turn help to keep pushing its economy forward.
East and West look to each other
While the term “overseas investment” is a broad one and reflects London’s global appeal, in terms of the central London property market and, in particular, the corporate office market, it’s Asian investors leading the way by a long margin. They accounted for about a third of turnover in the central London market as a whole and around 85% of the post-referendum turnover in the City market for office space. There are a number of factors which account for this. One is that Asia and, most especially China, is eager to be viewed as a significant global player, which means having a presence overseas. This ties in quite clearly with their interest in commercial property in London. Another factor is the relative safety of London as compared with other investment hotspots, even in the EU. London has a long tradition of behaving respectfully to overseas investors and viewing them as being equal to residents.