Investment into the London office market was down by 25% in 2016, as the effects of the referendum merged with the market peak in 2015 to hit buyer sentiment.
|
Q4 2016 total |
Q3 2016 total |
Q/Q % change |
Y-onY change |
£4,693bn |
£1,033bn |
354% |
-8% |
After two dreadful quarters both before and after the EU referendum in June, there was a boost in Q4, although this was still not enough to push annual transaction totals above £12.5bn.
It was, however, enough to restore the confidence of investment agents.
“The numbers are going to be down on 2015, but that being said I think there were some very interesting transactions in the fourth quarter, and the market was deeper and stronger than we anticipated,” says James Hammond, executive director at CBRE central London capital markets.
INVESTMENT BY AGENT 2016
Position |
Agent |
Total (£m) |
1 |
Savills |
£4,660.51 |
| 2 | Cushman & Wakefield | £3,108.81 |
| 3 | JLL | £2,917.7 |
| 4 | CBRE | £2,731.45 |
| 5 | Knight Frank | £2,463.80 |
| 6 | GM Real Estate | £1,706.35 |
| 7 | Colliers International | £1,444.06 |
| 8 | Strutt & Parker | £1,192.15 |
| 9 | Michael Elliott | £1,100.67 |
| 10 | BNP Paribas Real Estate | £473.03 |
INVESTMENT BY AGENT Q4 2016
Position |
Agent |
Total (£m) |
1 |
CBRE |
£843.5 |
| 2 | JLL | £709.8 |
| 3 | GM Real Estate | £597.75 |
| 4 | Savills | £486.8 |
| 5 | Strutt & Parker | £381.5 |
| 6 | Cushman & Wakefield | £323.7 |
| 7 | Michael Elliott | £270.4 |
| 8 | Knight Frank | £229.52 |
| 9 | TH Real Estate | £115 |
| 10 | Tudor Toone | £103.5 |
| 11 | Farebrother | £60 |
| 12 | Gryphon Property Partners | £54.27 |
| 13 | Colliers International | £38.6 |
| 14 | BNP Paribas Real Estate | £33.5 |
| 15 | John Miles & Company | £28.4 |
| 16 | Mellersh & Harding | £5.56 |
| 17 | Richard Susskind & Co | £3.07 |
TOTAL INVESTMENT: 2013-2016
| 2013 | 2014 | 2015 | 2016 |
£17,323 |
£16,174 |
£16,658 |
£12,445 |
Unprecedented activity of overseas purchasers
Investment is being driven by the global hunt for yield, but also the well-documented advantages created by the fall in the value of sterling.
Stephen Down, head of central London and international at Savills, says: “In Q4 in particular, we witnessed an unprecedented level of activity by overseas purchasers, partly due to the attractive currency shift following the EU referendum but also as a result of various domestic push factors.”
The need of many Chinese buyers to invest outside of China before there are further restrictions on money was also seen as a saviour for the market.
Far Eastern investors take 40% of market
Paul Brown/REX/Shutterstock
Nick Braybrook, partner and head of capital markets at Knight Frank, says that around 80% of investment into the London office market was from overseas, with Far Eastern investors accounting for about 40% of that total.
And for the moment, wider global instability has acted in the UK’s favour.
“London and the UK are perceived to be a secure, safe havens for money and as we speak there continues to be no sign of any weakening,” says John Olney, director & co-head of London offices at Colliers International.
Olney however, says there are two main threats: a macro-economic environment with a lot of risks, and threats to the occupational market.
While for the moment headline rents have held out, any indication they are starting to fall is a concern for investors, currency plays or not.
“If we see any weakening in occupational demand, that will affect investment,” adds Colney.
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LONDON OFFICES MARKET ANALYSIS Q4 2016
• Analysis – offices drop by 25% but rate of descent slows
• Who is London’s top office agent?
• London offices breakdown by submarket
• London office investment down by 25% in 2016
• Who is London’s top Q4 agent?
• Four things you need to know about the London offices market
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