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London World’s Most Active Cross-Border Real Estate Investment Market in 2018

Asians dominating London commercial property investment activity

Global real estate consulting firm Knight Frank is reporting this week that in the first half of 2018 £5.6 billion ($7.2 billion USD) of international capital was invested in the London commercial real estate market. Hong Kong was second with £5 billion ($6.4B) and Paris third with £1.9 billion ($2.4B).

Asian investors dominate and accounted for £4.4 billion  ($5.6B) or 65 percent of which Greater China led the way with £2.6 billion ($3.3B) or 38% percent, and £1.8 billion ($2.3B) or 27% percent from other Far Eastern nations, with £906 million ($1.17B) of that from Singapore and £790m ($1B) from South Korea.

London leads the way as the favorite destination for global capital as there is a significant, and growing, weight of cash targeting real estate as an asset class. The money derives from a range of investors that spans global institutions, to equity funds, to private capital, all of which value the ability to deploy capital in large lot sizes which London’s commercial real estate offers.

Nick Braybrook, Head of Capital Markets London, Knight Frank reports, “Despite the political turmoil surrounding the UK with Brexit, London is once again the most liquid real estate market in the world. It is more popular as a home for international investment than Paris Central, Manhattan, Munich and Frankfurt combined. Asian real estate investors continue to be the largest and one of the most important global capital exporters with South Korea and Singapore more active than previously. The largest five deals in the market this year have all involved Asian capital and this trend looks set to continue for the foreseeable future.”

London with its stability, transparency, and liquidity remains the compelling destination for international capital. Knight Frank’s global Wealth Report shows that many ultra high net worth individuals – which will see a further rapid growth of in the next five years globally – rank London as their first port of call for their maiden overseas property investments.”

William Matthews, Head of Capital Markets Research, Knight Frank commented, “As a home for international capital London increasingly enjoys another benefit over its global city competitors, in the form of relative value. One corollary of rising demand for European real estate is that capital has been funneled into continental markets that are traditionally nowhere near as liquid as London, and this has quickly led to exceptionally low yields – 3.00% is a common prime yield across many European cities, not just capitals.

“In a comparative sense at least, London office prime yields can therefore seem good value to overseas investors, particularly given prospects of modest rental growth, and the recent movements in Sterling, which provide an added currency advantage.

“Longer-term, this could prove the right mix of attributes to attract global capital targeting Europe, a significant proportion of which comes from experienced overseas investors who are less singularly focused on capital preservation and value the prospect of comparatively healthy income returns”, concluded Matthews.

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